Brief excerpt:
Now let’s look at MBS. Below is a table showing Agency MBS outstanding Agency MBS held by the public, and Agency MBS held by the private sector. (Again, the Fed holdings are as of the last Wednesday in December).
The Fed’s share of total Agency MBS outstanding hit a year-end high of 32% at the end of 2021 and was still above 27% at the end of last year. Again, Fed MBS purchases essentially involved taking longer-maturity fixed-rate MBS held by the public and “replacing” them with extremely short-term bank reserves/deposits at the Fed, thus reducing NOT the amount of government obligations held by the private sector, but significantly reducing the maturity/duration of government obligations held by the private sector.
Computing the impact of Fed MBS purchases on the maturity of government obligations held by the private sector is more challenging for MBS than for Treasuries, as the expected weighted average maturity/duration of MBS are heavily dependent on where interest rates are relative to the interest rates on the mortgages backing MBS.
There is much more in the article.