The Fed Strikes Back
Mortgage bond prices whipsawed down and back up following the Fed meeting
The Fed Fed leaves rates unchanged and said:
Will try to keep rates low for extended period
Economic activity continues to pick up
Markets roughly unchanged since last meeting
Inflation to remain subdued
Monitoring balance sheet to make adjustments to credit/liquidity programs as needed…>THIS statement has some concerned.
In addition, they indicated they will only spend $175 billion to buy AGENCY debt, down from the $200 billion originally announced. They attributed the reduced purchase amount to limited availability of Agency debt.
Additional debt supply concerns are weighing on the market as traders prepare for next week’s auctions of $40B 3Y Monday, $25B 10Y Tuesday, and $16B 30Y Thursday.
The ADP employment report showed 203k jobs lost, weaker than the expected 198k loss. On the surface it appeared to be bond friendly, but was an improvement from the prior month’s loss of 227k.
