MBS RECAP: Bonds Take a Day to Digest Fed Day as Stocks Finally React


Posted To: MBS Commentary

Apparently it took the 9:30am NYSE opening bell ringer for stocks to truly realize what just happened. The Fed announcement on Wednesday was their way of saying "sorry" to stocks for the "steady as she goes" approach to tighter monetary policy in December. As of Wednesday the Fed's median outlook for the Fed Funds Rate is now half a point lower for 2019-2020 and whereas Powell said in December that the balance sheet runoff was on autopilot with no reason for that to change, the just-announced change has the Fed completely doing away with balance sheet runoff on October 1st, and taking a $15bln/mo bite out of it starting in May. So just to be clear… that's by far the biggest downward adjustment in the Fed's rate hike outlook we've seen in more than a decade…(read more)

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