MBS Week Ahead: Bonds Brace for Fed; History Suggests Not Getting Too Excited

Posted To: MBS Commentary

The week's key event is undoubtedly Wednesday's FOMC Announcement, but should markets be getting worked up over the possibility of a change? Of course we can be nearly 100% certain that a "change," in this case, would NOT amount to an actual rate hike, but instead would simply be a change in the verbiage that alludes to the eventual hike. In trying to divine what form such a change might take, we have several solid clues. The last FOMC announcement placed some blame on the global economic outlook as a barrier to hiking rates. Fed speakers subsequently said that the US economy justified a hike, but that they were waiting to make sure the overseas outlook wasn't deteriorating (because a weaker global economy would create further headwinds for inflation and domestic growth...(read more)

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