Have Federal Reserve MBS purchases affected market functioning?

•I examine the effect of Federal Reserve MBS purchases on market functioning.•Evidence of market disruption began to appear during LSAP 3 MBS purchases.•The magnitude of the effects I observe appear to be of limited economic significance.

Beginning in October 2011, the Federal Reserve began ongoing purchases of Mortgage Backed Securities (MBS). I test the extent to which these purchases were associated with disruptions in indicators of market functioning by using daily data on Federal Reserve MBS purchase operations. I find that two separate proxies for market functioning show adverse responses to Federal Reserve purchases that appear to be most closely linked to the additional open-ended MBS purchase program announced in September 2012. However, the magnitude of the disruption in market functioning appears to be quite modest.