MBS ALERT: FOMC ANNOUNCEMENT, Initial Reaction Bad
By:
Matthew Graham
•
- FED SAYS EXTENDS PURCHASES OF LONG-TERM U.S. TREASURY DEBT TO END OF OCTOBER, KEEPS AMOUNT $300 BLN
- TIMING AND AMOUNT OF PURCHASES OF AGENCY MBS AND AGENCY DEBT UNCHANGED
KEEPS BENCHMARK RATE IN ZERO TO 0.25 PCT RANGE; RATES TO STAY VERY LOW FOR EXTENDED PERIOD - ECONOMIC ACTIVITY LEVELING OUT, FINANCIAL MARKET CONDITIONS HAVE IMPROVED FURTHER
- PRICES OF ENERGY, COMMODITIES HAVE RISEN; BUT RESOURCE SLACK LIKELY TO DAMPEN COST PRESSURES
- FED REPEATS WILL EMPLOY ALL AVAILABLE TOOLS TO PROMOTE ECONOMIC RECOVERY, PRESERVE PRICE STABILITY
- HOUSEHOLD SPENDING SHOWS SIGNS OF STABILIZING, BUT REMAINS CONSTRAINED
- BUSINESSES CUTTING BACK ON INVESTMENT BUT ALIGNING INVENTORIES WITH SALES
- ECONOMY LIKELY TO REMAIN WEAK FOR A TIME BUT POLICY ACTIONS WILL CONTRIBUTE TO GRADUAL RECOVERY
- MONITORING SIZE, COMPOSITION OF BALANCE SHEET, TO MAKE ADJUSTMENTS AS WARRANTED
- INFLATION TO REMAIN SUBDUED FOR SOME TIME
- EXTENDING TRSY PURCHASES TO END OF OCTOBER TO PROMOTE SMOOTH TRANSITION IN MARKETS AS BUYS END
- VOTE ON POLICY ACTIONS WAS UNANIMOUS'
Initial Reaction has been a slight downtick taking us exactly in line with previous lows. If your lender is jumpy and didn't already reprice for the worse, they MIGHT now, HOWEVER, the losses are already moderating in traditional post-FOMC volatility, so this is by no means an indication of the direction of the rest of the day. Stay closely tuned as more volatility is likely, including a possible regression to the previous range of the day.