MBS RECAP: FOMC Trumps Econ Data; Mortgage Rates Mentioned in Statement
Wednesday, July 31, 2013 5:07 PM
The Fed is to be applauded for mentioning mortgage rates in today’s official Announcement in an unprecedented way. While the Fed is the very picture of unprecedented intervention in mortgage markets, today’s trick was new. In the past the mortgage-related policy communications have been limited to statements about the nuts and bolts of mortgage-backed-securities purchases and at their most colorful, saying these actions should “support mortgage markets.” In that sense, we’ve frequently seen the Fed imply they’d backstop mortgage market stability, but we had yet to see them come out and acknowledge mortgage rates as something they have their eye on. It was very subtle: “mortgage rates have risen somewhat,” but it’s a first. It was also offered as a “yeah but” to the strengthening housing market. All things considered, it says a lot about how closely they’re watching if the term “mortgage rates” made it into THIS announcement and not June 19th’s–NOT because rates aren’t much higher now, but rather because the Fed has heretofore been focused on the SPREAD between MBS and Treasuries which is currently in the same territory it was even before June 19th. Ergo, they’re cognizant of rates and the potential fallout. Bravo Fed. Incidentally, the rest of the statement had a moderately dovish tilt that offset the morning’s scary economic data (scary in the sense that it sent rates higher). Treasuries might not have rallied as much as they did had it not been for an emboldened mortgage complex that readily soaked up the heaviest day of supply in weeks and kept asking for more. The possibility that some of the levity could be attributed to month-end buying is debatable. Tomorrow’s trading might tell us more about how much that was the case (that bonds may have rallied more than they otherwise would had it not been for month-end buying needs). Either way, NFP on Friday is still the biggest consideration.
More from MND:
- Mortgage Rate Watch: Volatile Day Leaves Mortgage Rates Largely Unchanged
- MBS Commentary: Differences Between Past and Current FOMC Statements
- MND NewsWire: FHA "Solvency" Bill Goes to Full Senate
- MBS Commentary: MBS MID-DAY: Weaker After Data, Sideways Ahead of FOMC
- Community Commentary: Build Your Own Fed Statement
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