MBS Day Ahead: Mortgages Are Underperforming. Would The Fed Ever Step Back In?

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Posted To: MBS Commentary

A bit of a diversion from the typical "Day Ahead" this morning as I came across an interesting assertion while talking about mortgage rates with some friends… One of them suggested mortgage rates have more room to move lower if the Fed decides to start reinvesting its first $20bln a month of MBS proceeds again (which it currently allows to "roll off" the balance sheet). Very smart line of thinking considering this guy probably didn't have change for a nickel, but I digress. It would be a big surprise to see the Fed move that direction with respect to mortgage-backed-securities (MBS). They have been clear and consistent in their message regarding a return to a portfolio consisting primarily of Treasury securities. This has been all the more critical given the recent…(read more)

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