MBS Day Ahead: Jerome Powell Testimony Could Set Stage For Next Big Move

Posted To: MBS Commentary

The Fed is undoubtedly a major factor in market movement--especially when it comes to rates. At first glance, the key consideration is their collective stance on future rate hikes. But given the recent comments from multiple Fed speakers, we're increasingly going to need to scrutinize comments about the Fed's balance sheet. The balance sheet can be thought of like the Fed's stash of bonds. From there, think of bonds like loans the Fed has invested in. In that sense, the Fed is a mortgage lender , both to the US government and to actual mortgage borrowers (because they've bought plenty of MBS). As a big old mortgage lender, the Fed has a choice to grow, maintain, or shrink its book of business by deciding what it will do with the cash it receives when its borrowers pay off their...(read more)

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