MBS RECAP: Some Reaction to NFP, But Just as Much to Harker and the Curve


Posted To: MBS Commentary

Harker and the curve… It's not a song or a morning radio show. It's a reference to the Fed's Patrick Harker commenting on the yield curve today as well as the possibility of slowing down rate hikes in order to keep arrows in the quiver in the event the tax bill results in some sort of economic overheating. In that case, the Fed would like to have some more room to hike rates without bringing them up to levels that would guarantee yield curve inversion (i.e. 2yr yields higher than 10yr yields). Such inversions are thought to precede recessions (and indeed they've reliably done just that, although past precedent is never a guarantee for anything in financial markets). The important takeaway from the Harker comments was for traders who'd been focusing on trading the yield…(read more)

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