Saturday , 18 August 2018

MBS RECAP: Mostly a Knee-Jerk Reaction to Fed Dots and Powell

By Matthew Graham

Posted To: MBS Commentary

In one sentence, today’s Fed rate forecasts pushed bonds into weaker territory at 2pm and Jerome Powell’s press conference helped to recover most of the losses. The forecasts showed a slightly higher probability of 4 rate hikes in 2018. The average “dot” (so named for the dot plot on which the forecasts appear) also moved a hair higher in 2019 and 2020. This was the key market mover at 2pm, even though the Fed announcement was heavily edited from its previous version. It probably didn’t help that most of the edits were easier to argue as “unfriendly” for bonds. That said, it would be harder to argue they were unexpected or unjustified. Powell’s press conference saw bonds bounce back and recover most of the losses, starting at 2:30pm. He said he wasn’t…(read more)

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MBS RECAP: Mostly a Knee-Jerk Reaction to Fed Dots and Powell

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