WE thought people only listen when E.F. Hutton speaks. Not true! Looks like Janet Yellen, the new Fed Chair can move markets too. According to the Washington Post yesterday, her optimistic assessment of the nation’s economic prospects, despite recent poor job growth, rallied the stock market. And thus, pulled money from treasuries and mortgage backed securities (MBS) causing rates to go up a bit. We will stay tuned!
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Ben Bernanke, Fed Chairman, blew up the bond and mortgage markets a month ago with his comments that the Fed is preparing to begin reducing the monthly purchases of treasuries and mortgage-backed securities. Rates spiked, and left folks shopping for mortgages, shaking their heads. The minutes for June’s meeting of the Federal Open Market Committee (FOMC) suggest that committee members are mostly in agreement that the current quantitative easing program (QE) should begin winding down by year-end, but the committee minutes are very clear about the committee’s intention to monitor inflation and ongoing economic and financial developments before taking action to reduce the current rate of QE. Continue reading →
The unrelenting selling in the MBS markets has gotten a bit out of hand, and has a panicked feel. This may have something to do with the Fed, who suggests that the present quantitative easing (QE) program may be modified in the near future. This is not a surprise as Fed chairman Ben Bernanke said, at some point the Fed would begin exiting, likely inch by inch but obviously not in one fell swoop as the market decline over past few weeks seems to imply (see chart).
The current QE program involves the Fed purchasing $85 billion per month in mortgage-backed securities (MBS) and Treasury bonds. The Fed’s goal with QE is keeping long-term interest rates, including mortgage rates, low. Continue reading →
The minutes for the Federal Open Market Committee (FOMC) meeting held March 19 and 20 were released on Wednesday April 10, 2013. These periodic meetings by the FOMC cover a wide-ranging group of topics that impact the overall economy in the United States.
The decisions made and acted upon from the FOMC meetings often sway the real estate and residential financing markets. Some highlights of the recent FOMC minutes for the March meeting include: Continue reading →
The Federal Reserve’s statement after yesterday’s Federal Open Market Committee (FOMC) meeting left no doubt as to the Fed’s dual commitment to keeping long-term interest rates down and encouraging economic growth. But there were a few subtle changes to the Fed’s current bond-buying program made during today’s FOMC meeting.
The Fed buying bonds and Mortgage Backed Securities (MBS) works by boosting bond prices, which typically helps with keeping mortgage rates lower. Instead of the Fed’s monthly purchase of $85 billion in bonds and MBS per month, they will now make the call if they want to reduce these purchases, depending how well the economy is performing. Instead of turning this quantitative easing (QE) OFF or ON, they can use the concept of a “dimmer” switch instead. Continue reading →