Yesterday, the Existing Home Sales came in much stronger than expected. This shows some good strength in the housing market because this data included closed loans with the higher interest rates. This positive economic news was negative for MBS and MBS sold off immediately.
The minutes from the last FOMC meeting
were released at 2:00EDT. You can read them at: http://www.federalreserve.gov/newsevents/press/monetary/20130731a.htm
Just prior to the release, the benchmark
FNMA MBS climbed off their lows of -26BPS to get all the way back to even. But
then MBS sold off -44BPS immediately following the release of the minutes. Why?
The minutes still do not provide a clear and definitive timeline for a pull
back in MBS purchases, and about half of the members support a move now and
half need more data to decide.
The
minutes still do not provide a clear and definitive timeline for a pull back
in MBS purchases, and about half of the members support a move now
and half need more data to decide. The minutes said “almost all” FOMC members
agreed the Fed should begin reducing its purchases of bonds later this year,
and conclude QE by the middle of 2014. However, one member said the central
bank should signal it will begin cutting its purchases in the “near future.” Broadly
speaking, the FOMC said the economy was expanding at a “modest” pace in the
first half of the year, but worried about excessively light inflation. The
dollar gained across the board, while stocks and bonds were hit negatively. While a clear plan was not outlined, a report
issued by Bloomberg breaks down the meeting:
The FOMC minutes may seem like
indecision, but bond traders look at the fact that a couple of months ago only
one voting member supported a tapper, then there were three, now it is half.
So, that growing momentum is why MBS specifically sold off. We recommended that
you should lock ahead of any investor re-price for the worse.
On Deck for Tomorrow:
Initial Jobless
Claims - a strong reading here could seal the deal for a September taper.
The Jackson Hole, WY
symposium starts and any info or commentary out of that meeting for the next
couple of days could cause some volatility.
Stay ahead of any negative market swings by staying in touch with a qualified Mortgage Professional.
- Michael Corboy
www.specialtyfinancialmtg.com
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