MBS Day Ahead: With Rates on The Move, How Low Can We Go?

Posted To: MBS Commentary

There's no question that the Fed was surprisingly dovish yesterday--even among those who were expecting a dovish shift. But there is a question as to what moved markets in the wake of the Fed. Specifically, are we dealing with the Fed's surprisingly friendly interpretation of current conditions or are we trading the underlying reality of those conditions (with the Fed merely confirming that it wouldn't be too pessimistic to do so)? For its part, the stock market firmly declared it was trading the Fed's interpretation yesterday. In fact, the Fed announcement was widely viewed as an acknowledgement that a certain amount of stock market turmoil would result in a friendly policy shift at the Fed, as long as runaway inflation isn't standing in the way. In other words, the Fed...(read more)

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