Fed Continues Easy Money

Good morning everyone!

Like we said yesterday, this is a big news week staring off with Fed Chairman Powell’s meeting with the Senate Banking Committee. Amplified by the amount of volatility the market is currently seeing, this meeting has the potential to swing the market either way. In the meeting, Powell held strong to his commitment to easy money policies until the economy is at acceptable inflation and employment levels. Reassured by his statement that these levels are a long ways away and that our current economy is “extraordinarily uncertain”, we can assume that Powell will hold this stance for the foreseeable future.

Final home appreciation numbers from 2020 are in this morning. The Case-Shiller report showed annual appreciation at 10.4% – an absolutely enormous year for the housing industry and a seven year record.

Mortgage Backed Securities started the day off with a 25 bps plunge but have since climbed up to an 11 bps drop from yesterday. Like we have talked about in recent reports, the rapid run that treasuries are on are pushing mortgage rates higher. Treasuries are currently hitting a ceiling that they have not touched since May 2020. Hopefully this ceiling holds. However, if it is broken, there is a lot of a room for treasuries to continue to run and drive the MBS market down. With the amount of news coming out this week and a volatile Treasury meeting, we are holding a locking bias.

Have a great day!