MBS RECAP: Fed Threads The Needle as it Preps Markets For Policy Shift

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Posted To: MBS Commentary

As expected, today was all about the Fed-related events. Yields moved exactly as far we thought they might based on the Day Ahead , AND in a friendly direction! But if I had to guess where yields would end up based on the contents of the Fed communications, I definitely would NOT have expected the result we got. While the tone of the announcement was much more dovish than the previous example, it was far from "alarmed." And the unchanged median forecast for rates at the end of 2019 could even have been taken as a cue for bonds to sell-off. After all, everyone's talking about 3 rate cuts in 2019, so if the median Fed member sees the same rate cut probability as they did in March, we have issues, right? Looking beneath the rate forecast headline, we see a clear migration toward…(read more)

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