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U.S. Fed buys $7.9 bln of mortgage bonds, sells $200 mln

NEW YORK, Aug 14 (Reuters) - The Federal Reserve bought $7.870 billion of agency mortgage-backed securities in the week from Aug. 7 to Aug. 13, more than the $7.648 billion purchased the previous week, the New York Federal Reserve Bank said on Thursday.

In a program that began in October 2011 to help the housing market recover, the U.S. central bank has been using funds from principal payments on the agency debt and agency mortgage-backed securities, or MBS, it holds to reinvest in agency MBS.

The New York Fed said on its website the Fed sold $200 million in mortgage securities guaranteed by mortgage finance sources Fannie Mae, Freddie Mac or the Government National Mortgage Association, or Ginnie Mae, in the latest week. It sold none the prior week.

At its July policy meeting, the Fed decided to reduce further its new purchases of MBS in August to $10 billion a month from $15 billion, as it aims to wrap up its third round of large-scale bond buying due to continued improvement in the U.S. economy. The Fed has also continued to reinvest proceeds from interest payments and maturing issues.

(Reporting by Richard Leong; Editing by James Dalgleish)