MBS RECAP: Bond Markets Cheer Fed Announcement, Sorta...

Posted To: MBS Commentary

It was an interesting Fed day for bond markets, with 10yr yields dropping 3.8bps and 2yr yields not dropping at all. That's the first clue that markets were not merely trading the prospects of a Fed rate hike (which would have the most effect on shorter term yields like 2s and 3s), but also were tuned in to the Fed's main thesis: LOWER FOR LONGER. The change in the Fed's projected path for rates was quite telling. In the following chart, each dot is a Fed member's opinion on where rates will be at the end of the next 3 years. Red dots from the June meeting became green dots today. Notice the mass migration: In no case do we see more green dots above red dots. That means it's unlikely that anyone at the Fed sees rates rising faster than they did in June (and if they do, they've...(read more)

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from Mortgage News Daily http://ift.tt/2di2Z3b