By the Numbers
Fannie Mae portfolio accelerates, Freddie Mac comes in flat
This material is a Marketing Communication and does not constitute Independent Investment Research.
Fannie Mae’s portfolio growth accelerated in March with balances up $18.3 billion. But Freddie Mac’s portfolio grew only $1.2 billion and stands only $534 million higher than at the end of 2025. This sharp divergence follows administration instructions for the enterprises to buy $200 billion in MBS this year. Most market participants have assumed Fannie Mae and Freddie Mac would adopt similar strategies, but differences in portfolio balances so far this year suggest otherwise.
The $18.3 billion added by Fannie Mae represents an acceleration of the growth rate of its portfolio (Exhibit 1). It was roughly double the monthly pace from December through February and about 40% more than it added last October, its largest month of growth in the last year. Fannie Mae added $17.7 billion in agency MBS, with the remaining growth coming from loans.
Exhibit 1. Fannie Mae’s investment portfolio growth accelerated in March
Source: Fannie Mae, Santander US Capital Markets.
Freddie Mac’s portfolio, however, has stayed at roughly the same balance since December (Exhibit 2). It only added about $500 million in agency MBS and $700 million in loans in March, far below Fannie Mae’s pace. In January and February it bought more securities but shed a comparable amount of loans, so the overall balance did not change much.
Exhibit 2. Freddie Mac’s investment portfolio balance was only slightly higher in March
Source: Freddie Mac, Santander US Capital Markets.
The market generally expected that each portfolio would add MBS. So, this raises the question of why Fannie Mae and Freddie Mac are managing their portfolios so differently. The available information may not lead to a satisfactory answer. Both portfolios may be responding to market conditions. Option-adjusted spreads tightened a lot following the administration’s January announcement, which may have deterred Freddie Mac from making purchases. Fannie Mae may have taken a different view.
A further complication is that the monthly portfolio data only includes settled positions. Fannie Mae and Freddie Mac could be buying TBA with settlement dates months in the future, making it difficult to link activity to market conditions. Spreads have recently widened again, but even if Freddie Mac has resumed buying the activity may not be observable for months.
Portfolio balances exceeded $300 billion in March (Exhibit 3).
Exhibit 3. The combined pace of portfolio growth has slowed
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
This disparate behavior this year has caused Fannie Mae’s portfolio balance to surpass Freddie Mac’s, with the gap widening each month (Exhibit 4). Fannie Mae’s portfolio is close to $170 billion, while Freddie Mac’s is just under $140 billion. Freddie Mac’s portfolio started the year almost $7 billion larger than Fannie Mae’s
Exhibit 4. Fannie Mae’s portfolio balance is almost $30 billion more than Freddie Mac’s
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
The rapid growth of Fannie Mae’s portfolio also pushed its duration gap over one year, and above Freddie Mac’s duration gap for the first time in the last year (Exhibit 5). In fact, Fannie Mae’s duration gap increased nearly 80% this month. But even Freddie Mac’s duration gap grew, despite subdued activity in the portfolio. This likely reflects rising interest rates in March and consequent extension in portfolio MBS duration.
Exhibit 5. Both portfolios continued to add interest rate risk
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
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