The Day After

Just as we have been predicting for months, the Fed finally announced another round of “Quantitative Easing”.  Virtually everything went higher yesterday after the announcement by Ben Bernanke.  Stocks are continuing the move higher this morning, but mortgage bonds and the U.S. dollar are both lower after investors have had some time to interpret what the effects of the Fed move actually means.  The Chairman cited information that implied a “grave” outlook for the economy, but Consumer Sentiment came out at a 4 month high this morning.  Ultimately, stock investors see the Fed available to prop up markets for as long as necessary, but that will obviously have other consequences down the road.  mortgage bonds have pulled back today and it’s likely that lenders will be tight with any improvements.  mortgage rare improvements will be further capped with the recent “tax” that the FHFA will add to every closed mortgage beginning very soon.  The improvement results in great interest rates for now, but still a struggle to move lower so we will advise a locking bias.