Here are the most notable changes:
- The vague notion of symmetric 2 percent inflation has been replaced with a specific goal of “moderately above 2 percent so that it averages 2 percent over time.”
- They now refer to bond buying as fostering “accommodative financial conditions, thereby supporting the flow of credit to households an businesses”
- The Fed added that they’re “prepared to adjust the stance of monetary policy as appropriate if risks emerge.”
That’s about it! Heading into the announcement, the list above served as a baseline for almost any prediction–a bare minimum taken “as read” before discussing additional/bigger changes.
The remainder of their potential impact would have to be gleaned from the updated economic projections which will be discussed in the video in greater detail.
Econ Data / Events
20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
Retail Sales 0.6 vs 1.0 f’cast, 0.9 prev
Core Retail Sales -0.1 vs +0.5 f’cast, +1.4 prev
NAHB Confidence 83 vs 78 f’cast, 78 prev
Market Movement Recap
10yr yields hit the lows of the day at 8:45am following a positive response to weaker Retail Sales data. Bonds have weakened modestly since then, ultimately hitting the highs of the day at 10:25am. Both Treasuries and MBS are still in positive territory on the day.
After 3-4 minutes of indecision bonds dipped into negative territory following the Fed announcement. It’s not a runaway sell-off though. In fact, we’re holding closer to unchanged-to-stronger. If we’re going to see a bigger move, traders may be waiting for Powell at 2:30. That said, there wasn’t much “meat” in this announcement.
Remarkably small reaction to what might have been remembered as a landmark Fed announcement. After the initial volatility shook out, we’re left with less than a 2bp rise in 10yr yields (and still very much inside the range). MBS are down 1 tick (0.03) on the day.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
102-31 : -0-01
0.6953 : +0.0163
|Pricing as of 9/16/20 4:41PMEST|
Today’s Reprice Alerts and Updates
2:49PM : ALERT ISSUED: Bonds Losing Ground More Quickly After Powell Downplays Asset Purchases
2:07PM : Bonds Losing Some Ground After Fed Announcement
12:27PM : ALERT ISSUED: Reprice Risk Considerations Ahead of The Fed
11:10AM : MBS Back in Negative Territory
8:43AM : Bonds Slightly Stronger After Weak Retail Sales Data
MBS Live Chat Highlights
Matt Graham : “RTRS – FED SAYS WILL MAINTAIN TREASURY AND AGENCY BACKED SECURITIES PURCHASES AT LEAST AT CURRENT PACE TO HELP FOSTER ACCOMMODATIVE FINANCIAL CONDITIONS”