MBS RECAP: Bond Market Lets Guard Down After FOMC Events; Big Rally

By: Matthew Graham

Most of what would have been written to recap today's events was accidentally written this morning before they happened.  The article I'm referring to asked the question: Is the market too far ahead of a predictable Fed?

The answer is/was 'yes.'

Long story short, the successive, relatively amazing jobs reports had more than a few market participants convinced that the Fed's rate-hike outlook would be accelerated.  While a June hike still can't be ruled out, the Fed (via Yellen, the forecasts, and statement) we saw today was balanced and perhaps erring on the side of pessimistic about the inflation and growth outlook.  It was a step away from the puzzling drive to raise rates despite the contraindications.  But there again, I discussed that the puzzling drive was partly due to markets interpreting the broader Fed stance from the ravings of a few of the fringe members.

Apart from the Fed, there was Europe.  European bonds rallied immensely overnight and into the domestic session.  US bonds couldn't get fully involved with that until they knew what the Fed was going to say.  Once bearish risks were ruled out, the domestic bond rally was able to commence and likely drew extra strength from the intentions it had to put on hold this morning.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
102-06 : +0-26
FNMA 3.5
104-31 : +0-20
FNMA 4.0
106-26 : +0-10
Treasuries
2 YR
0.5570 : -0.1170
10 YR
1.9180 : -0.1344
30 YR
2.5090 : -0.0980
Pricing as of 3/18/15 5:22PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:21PM  :  Key Differences in FOMC Statement and Forecasts
2:04PM  :  First Reaction to FOMC is Positive, but Not Unequivocally So
9:53AM  :  Mind-Bendingly Strong European Rally Drags US Yields Reluctantly Lower

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - FED SAYS INFLATION REMAINS WEAK, LARGELY DUE TO DECLINES IN ENERGY PRICES, MARKET-BASED EXPECTATIONS REMAIN LOW"
Matthew Graham  :  "RTRS- FED SAYS RISKS TO ECONOMY AND LABOR MARKET REMAIN NEARLY BALANCED"
Matthew Graham  :  "RTRS - FED SAYS ECONOMIC GROWTH HAS MODERATED SINCE ITS LAST MEETING IN JANUARY, POINTS TO SLOW HOUSING, WEAK EXPORT GROWTH"
Matthew Graham  :  "RTRS- FED OFFICIALS FORECAST SLOWER PACE OF FUTURE RATE HIKES, SLOWER GROWTH AND INFLATION BUT CONTINUED JOB GAINS"
Matthew Graham  :  "RTRS- FED SAYS WILL RAISE RATES AFTER FURTHER IMPROVEMENT IN LABOR MARKET AND WHEN IT IS "REASONABLY CONFIDENT" INFLATION WILL MOVE BACK TO THE 2 PCT TARGET"
Matthew Graham  :  "RTRS- FED SAYS NEW LANGUAGE CONSISTENT WITH PRIOR STATEMENT, MAKING A RATE HIKE AT APRIL MEETING "UNLIKELY""
Matthew Graham  :  "RTRS - FED DROPS PLEDGE TO BE "PATIENT" IN DECIDING WHEN TO BEGIN RAISING INTEREST RATES"