to securitize a group of mortgages with an average primary mortgage rate of 4 percent. the originator pays a fee of about 50 basis points to fannie mae, freddie mac or ginnie mae, in return for a guarantee on the principal and interest payments of the underlying loans. the originator is also required to retain at least 25 basis points to cover costs associated with servicing the loan. since coupon rates on fed funds equivalents are calculated by comparing the change in the 10 - year treasury yield due to asset purchases to the change that historically occurred following movements in the target federal funds rate. this is a simple framework, so the uncertainty around this measure is likely large. for more information on the tba market, see vickery and wright ( 2013 ). bis central bankers ’ speeches agency mbs are offered in 50 basis point increments, the originator might choose to sell the remaining cash flows to investors in the tba market in the form of an agency mbs with a coupon rate of 3 percent and retain the remaining 25 basis points. 9, 10 in this case, the 3 percent tba contract would be the production coupon. 11 the desk focuses its purchases in production coupons because these securities are the most liquid segment of the tba market and their yields are closely tied to the primary mortgage rate through the dynamics i just described. purchases are distributed across different agencies, maturities, and coupons in amounts that are roughly proportional to anticipated gross issuance of those securities. purchases lower the yield on these securities relative to where they would otherwise be, which should enable originators to offer lower mortgage rates to borrowers. 12 lower borrowing rates should in turn help stimulate demand in the housing market, support home prices, and increase mortgage borrowers ’ purchasing power. as i mentioned before, asset purchases affect interest rates in part by removing risk from investors ’ portfolios. although it will not be the case in all interest rate environments, currently, purchasing newly issued production coupons removes from private hands securities that generally have greater exposure to duration risk, since the borrowers whose loans back these lower coupon agency mbs have limited incentive to refinance. 13 moreover, by purchasing in the tba market, investors also ultimately deliver securities that have relatively more prepayment risk than the more valuable securities that trade as specified pools. one difficulty with purchasing in a manner that is roughly proportional to anticipated gross issuance is that it can be difficult to forecast

. why do we do this? why is it important to generate insights about individual workers rather than relying just on analysis of the aggregate data? the first, and most obvious, point is that the aggregate masks the experiences of individuals. not all workers and consumers experience the economy in the same way. employment, wage and income growth, housing, education, credit and a host of other outcomes vary significantly across different cohorts of individuals and these differences in turn can vary over the business cycle. to understand important economic concepts like full employment, financial security, productivity growth and the impact of education, it is vital to understand not just the average experience but rather how all cohorts of the population are faring. this understanding is important in and of itself, especially in evaluating the impact of critical trends affecting the economy, like technological innovation or demographics, as well as the policies intended to respond to the impacts of those trends. we cannot fully understand whether policies have improved social welfare unless we understand how the impact of those policies varies across individuals. but understanding heterogeneity is important even if we are just examining policy impact in the 1 / 2 bis central bankers'speeches aggregate. the most innovative macroeconomic models, those at the frontier of current economic work, recognize heterogeneity across consumers in assessing how monetary and fiscal policy changes are transmitted through the economy. these models incorporate individuals with different marginal propensities to consume, with different amounts of wealth or access to borrowing, or who face different risk exposures, such as the chance they become unemployed, over the business cycle. incorporating these factors can yield quite distinct insights about how changes in monetary or fiscal policy can affect growth, employment, wages and inflation. for those who want to know more, we published a blog post on monday of last week that describes the output of just such a model. regardless of the specific details, the key is that differences across individuals can be important for understanding how the economy works, even in the aggregate. for all these reasons, the research group at the new york fed is committed to continue our work on heterogeneity, across several dimensions of what we do. we are always looking for ways to expand and deepen our knowledge, to enhance the data that is available to our economists and others to do deep, sophisticated research on these topics, and, critically, to publish the work so that we are adding to the store of knowledge both among academic researchers and among policymakers. we are well