MBS Week Ahead: Fed Week Is Here. Let’s Looks at Possibilities


Posted To: MBS Commentary

More than anything else over the past 3 weeks, a shift in tone among Fed speakers has been at the heart of the year's best bond market rally. Seemingly overnight, the average Fed member went from saying things like "3 more hikes in 2019" to "very close to neutral." Markets would do well to remember that a few Fed speeches from the past have indicated the Fed's willingness to take rates temporarily above neutral, if needed, but that was really only a risk in the event economic growth continued to accelerate. While economic growth is still relatively strong, there doesn't seem to be much concern about it accelerating at the moment. That means that the neutral Fed Funds Rate is probably the point at which rate hikes will pause. Thus, "being close to neutral"…(read more)

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