The consensus reading of the Fannie Mae and Freddie Mac mortgage-backed securities buyback programme is that it is doing its job of keeping the mortgage rate spread stuck below levels that would push borrowing costs past 7%. The data, read carefully, suggest something rather less tidy.
The 30-year fixed mortgage rate, as measured by Freddie Mac, rose to 6.71% for the week through Wednesday 2 September, the highest in over a year. The 10-year Treasury yield as of the same Wednesday stood at 4.74%. The spread between the two: 1.97 percentage points, essentially identical to where it sat at the end of December 2025 and at the start of January 2026, before Fannie and Freddie announced the accelerated buybacks with considerable fanfare on 8 January 2026.
In other words, months of buyback activity have moved the spread by approximately nothing.
What the Buyback Programme Was Supposed to Do
The spread between 30-year mortgage rates and 10-year Treasury yields had widened sharply in 2022 and 2023, reaching more than 3 percentage points, the most since the early 1980s. By the end of 2025 it had already narrowed by a full percentage point, largely as the Federal Reserve slowed and then ended quantitative tightening. The buyback programme, announced in January 2026, was positioned as the next lever: Fannie and Freddie buying back their own previously issued MBS to compress the spread further.
The U.S. government issued a directive instructing the two government-sponsored enterprises to purchase up to $200 billion in mortgage-backed securities, according to Mutual of Omaha Mortgage. In execution terms, the two entities added a combined $12.5 billion in agency MBS to their retained portfolios in January alone, per HousingWire. The programme clearly got off the ground. The question is what it actually achieved.
Mortgage rates fell from 6.21% before the January announcement to 6.01% by the end of February. Then they reversed, rising back to the current 6.71% as the 10-year Treasury yield surged. The spread is now precisely where it was when the whole exercise began.
The Mechanism Working Against Itself
There is a structural tension in the buyback design that the bullish framing tends to skip past. To fund MBS repurchases, Fannie and Freddie draw on operating cash flow they would otherwise use to buy Treasuries, and they sell Treasury securities already held on their balance sheets. The result: two entities that were previously significant buyers and holders of U.S. government debt have become net sellers of it. That selling pressure contributes to higher Treasury yields, which in turn keeps the mortgage rate spread stuck even as the buybacks theoretically compress it from the MBS side.
The spread is thus being squeezed between two forces pulling in roughly the same direction on mortgage rates: buybacks narrowing the MBS-Treasury differential, and rising Treasury yields lifting the base from which mortgage rates are calculated. The net effect, so far, is a wash.
The Federal Reserve adds another layer of complexity. The Fed’s quantitative tightening formally ended in December 2025, but MBS runoff continues at a rate of approximately $15 to $18 billion per month, determined by passthrough principal payments as underlying mortgages are paid off or paid down. The Fed has shed $827 billion, or 30%, of the MBS it accumulated during quantitative easing, including $190 billion over the past 12 months and $17 billion over the past four weeks. That ongoing runoff maintains upward pressure on the spread, and the Fannie and Freddie buybacks appear to be largely counteracting it, rather than driving the spread meaningfully lower.
Worth remembering: the 10-year Treasury yield is essentially unchanged compared to October 2023, yet 30-year mortgage rates have dropped a full percentage point over that same period. All of that narrowing predates the formal buyback acceleration. The buybacks may deserve credit for holding the spread at 2 percentage points rather than letting it drift back toward 3. That is not nothing. But it is also not the compression story that accompanied the January announcement.
The arithmetic for breaching 7% is reasonably clear. At a spread of around 2 percentage points, mortgage rates cross that line when the 10-year Treasury yield moves above 5% and holds there. The 10-year yield reached 4.77% earlier this week before dipping back. In October 2023, it briefly touched 5% before retreating sharply. Whether the next approach produces the same retreat is the question the buyback programme, for all its scale, cannot answer on its own.
