Today's Mortgage UpdateDec 13 2012
Mortgages are losing ground this morning despite yesterday’s slightly more dovish FOMC statement. Current coupon MBS are starting the day 7 to 9 tics weaker and the yield on the US Ten Year note is at a 6-week high of 1.73%. As expected, the FOMC announced $45bn in outright Treasury purchases and a continuation of the $40bn in MBS purchases. The surprise came from the decision to replace the calendar commitment for continued QE with benchmarks tied to economic data, namely the unemployment rate over inflation. They also made the distinction between the rationale for further QE and increasing rates, with the purpose of QE being to simulate the economy. Expect the Fed to continue QE through most of 2014. Rate hikes will not begin for a “considerable time” after QE ends..at least late-2015. With that, I’m not overly concerned about the sell-off in bonds we’ve seen this week.