(Bloomberg) — Fannie Mae and Freddie Mac have begun placing sizable orders to purchase mortgage-backed securities, stepping into a market roiled by widening bond spreads amid a surge in volatility, according to a person with direct knowledge of the matter.

The government-controlled entities are moving to capitalize on a sharp selloff while expanding their already significant portfolios of bonds and loans, said the person, who asked not to be identified discussing confidential information. Their efforts follow a directive two months ago from President Donald Trump instructing the pair to acquire $200 billion of MBS as part of a push to bolster housing affordability.

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The increased buying could help cushion a recent spike in spreads that has lifted mortgage rates to a three-month high. Still, it may only partially offset broader market pressures stemming from the US-Iran conflict that have driven borrowing costs higher, punctuated by a marked jump in Treasury yields on Friday.

Representatives for Fannie, Freddie and the Federal Housing Finance Agency, which oversees both companies, didn’t respond to multiple requests for comment.

Fannie and Freddie, which purchase and package home loans into securities and financially guarantee them to buyers, rank among the largest holders of US mortgage debt via their so-called retained portfolios — the bonds and loans they hold onto rather than sell to investors.

The pair, under federal conservatorship since 2008, once held a combined $1.5 trillion worth, but by late 2022 that figure had dropped to just $158 billion. Since the middle of last year the portfolios have been on the rise again, climbing to $278 billion as of January, according to the most recent data available.

Trump’s directive for Fannie and Freddie to ramp up bond and loan purchases sparked an almost immediate move in the roughly $9 trillion MBS market, with relative yields to Treasuries on recently issued securities narrowing about 0.2 percentage point.

In the weeks that followed, however, the pair bought at only a modest pace. That likely reflected already compressed risk premiums on many mortgage bonds, which left limited profit potential and reduced scope to meaningfully influence mortgage rates.

Mortgage-bond spreads have widened sharply since then, as a pickup in interest-rate volatility, driven in part by swings in oil prices amid the escalating conflict in the Middle East, ripples through fixed-income markets.

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