MBS RECAP: Here’s Why Bonds Loved The Fed Today (And It’s NOT The DOTS)


Posted To: MBS Commentary

You may see news stories about the Fed shifting its rate hike outlook (conveyed in a dot plot often referred to as "the dots") to "zero hikes in 2019," but that's not today's big news. Today's big story is exactly the one we were looking for: a concrete announcement on the Fed's bond-buying plans. Specifically, the Fed's previous policy of allowing its balance sheet to shrink by a predetermined amount every month is officially on borrowed time . Starting in May 2019, the Fed will lower the maximum runoff amount from $30bln to $15bln per month. Simply put that's an immediate $15bln month injection of new bond buying demand. If I had to guess (and I don't anymore), I'd say that is both sooner and a bigger move than the market was expecting….(read more)

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