A Fed-Treasury asset trade? One analyst says a swap could help the struggling housing market.

By Steve Goldstein The Fed could send its $2 trillion portfolio of mortgage-backed securities to the Treasury, in return for an equal value in Treasury bills, posits Evercore ISI analyst Krishna Guha The Federal Reserve and the Treasury Department should swap assets, says an analyst. The White House is proposing a flurry of policies to stimulate the moribund housing market, and one analyst is proposing another twist. Evercore ISI analyst Krishna Guha, in a note published Wednesday, says the Federal Reserve and U.S. Treasury should make a trade - the Fed would send its $2 trillion portfolio of mortgage-backed securities to the Treasury, in return for an equal value in Treasury bills. He is quick to point out the idea is his own, and not sourced to the administration, the Fed or any candidate to lead the central bank. The idea would be that the Trump administration would be able to suspend the run-off of mortgage securities the Fed is currently conducting. "This would put additional downward pressure on mortgage rates, possibly lowering spreads another 20-30bp, though there could be some mild offsetting increase in Treasury rates," Guha said. For the new Fed chair - perhaps Kevin Warsh - it would "reduce the duration on the Fed balance sheet and get rid of non-Treasury securities while rebalancing the Treasury portfolio towards the front end with a large block of bills," according to Guha. See: Trump's latest move against Powell could mean a delay for the president's big chance to install a new Fed chair Granted, nothing is free. The Fed would have to take a loss on the order of some $320 billion on the trade, according to Guha's estimate. And the Treasury would see reduced flexibility in its ability to shift issuance to short-duration securities. Guha said he's not sure whether Congress would need to approve such a trade, though he said it would as a practical matter require consultation with House and Senate legislators. And he said the full Fed board might have to OK the transaction. Related: Homeowners and home buyers race to lock in falling mortgage rates -Steve Goldstein This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 01-14-26 1010ET