Today's Market ReportFeb 21 2013
The market is fading the Fed hawks this morning, as current coupon MBS find themselves up about 8/32nds from yesterday’s close. While yesterday’s release of the January FOMC meeting showed a major split among Fed officials over the potential capital losses to the Fed’s balance sheet, most of the more hawkish officials are actually non-voting members. The majority of voting members have emphasized the benefits of the Fed purchase program. Some of the issues/concerns raised in the minutes, include: 1- concerns about potential losses to the Fed balance sheet once they transition to their exit strategy, 2- worries about financial stability, & 3- “a few” listed inflation concerns. Bonds are also being fueled by the selloff in stocks. The DOW is under 14,000 again, down nearly 200 points from yesterday’s open. Earlier this morning, CPI showed the cost of living was little changed in January, with a second month of lower fuel costs. Initial jobless claims showed a slight increase in unemployment and Philly Fed showed a significant drop in manufacturing activity in the Philadelphia region, -12.5% vs. -5.8 in January. While mortgages are up on the day, that’s not to imply that I think we’re going to rally further. Mortgages are still well contained in the recent trading range, which is right around the 2% yield on the 10yr contract.