PIMCO, one of the world's biggest managers of bonds,
1) wants to buy more mortgage-backed securities dating from the financial crisis
2) Wants to buy mortgage securities backed by Fannie Mae and Freddie Mac.
There are arguments for and against investing in old mortgage-backed securities, the major one being:
How will PIMCO find a sucker to take those bonds off its hands later?
Mortgage-backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae are called "agency MBS."
They are not like other securities. They used to be implicitly backed by the US govt. Since the bailouts of 2009, that became explicit.
If anything goes wrong with Fannie Mae and Freddie Mac securities,
the people who own them will no doubt get bailed out by the US government.
So why is that a problem? (Besides that bailouts are intrinsically problematic).
-PIMCO is big enough to make a market
--PIMCO has just declared itself a buyer, so others know they can buy and then sell them to PIMCO
Normally this would be the usual market nonsense but these securities are *backed by the govt.*
Don't like that! NOPE!
They essentially had to be nationalized. The US Treasury cut out all shareholders -- people who bought the stock -- and claimed all profits for taxpayers.
Bonds and other debt securities, however, always get paid out in a crisis. It's a bond! A bond - a promise. MBS falls under this.
This may not happen. Lots of crises are avoided. But it *could* happen.