the fed

Fed Hikes Rates; Rates Drop Sharply. Here’s How That Works

There was some debate as to whether or not the Federal Reserve would hike the Fed Funds Rate today, although the consensus was for a 0.25% increase.  That’s exactly what the Fed delivered.  Additionally, markets were (and still are) betting that the Fed cuts rates by roughly 0.75% by the end of the year, but the Fed’s just-released forecasts show zero rate cuts by the end of the year and slightly HIGHER rates by the end of 2024. Despite all this, Treasury yields (a benchmark for mortgage rates) and mortgage rates themselves fell significantly after the Fed news came out. Why in the world could that happen?   First off, the Fed Funds Rate is not a mortgage rate, nor does it directly affect mortgage rates by the time the Fed actually hikes or cuts.  More importantly, Fed Chair Powell spoke about upcoming tightening of lending conditions due to the recent banking drama.  That may seem like a simple enough comment, but it carries a lot of weight in terms of shaping economic momentum. Lending and credit are critical to growth and inflation.  If lending subsides (fewer loan programs or more restrictive requirements to qualify), it puts additional downward pressure on inflation.  And inflation is the key reason rates have remained high. Long story short, in spite of the Fed rate hike and the relatively unchanged outlook for 2024, the market saw some indication of a policy pivot in Powell’s comments–some shifting of the big picture cycle of economic growth and inflation.  Either that, or Powell’s warning on banks caused investors to fear additional banking issues in the days/weeks ahead.

Powell stresses commitment to cooling prices as Fed hikes rates

The Federal Reserve raised interest rates at a ninth straight meeting and indicated there may be more hikes to come in a clear sign it’s confident that its bid to quell inflation won’t deepen a nascent banking crisis. The Federal Open Market Committee voted unanimously to increase its target for the federal funds rate by … [Read more…]

Why industry watchers expect mortgage rates to fluctuate in coming weeks

Mortgage rates, which climbed one day and dropped the next after the bank failures, will be volatile before stabilizing, experts say.

Fed delivers a 25 bps rate hike amid bank failures 

The Fed has decided to forge ahead in its fight against inflation, despite several bank closures that have caused turbulence in the financial markets.

Mortgage Rates May Drop Despite Fed Rate Increase

A toned-down Fed rate increase and a stampede into bonds could lead to lower mortgage rates.

Simple, Boring, Half Point Sell-Off in MBS

Absence of Data Leaves Even More Focus on The Fed If there happened to be some significant economic data today, or on the next two mornings, financial markets might wait to see what it implied before diving head-first into the pastime of overanalyzing Fed rate hike odds.  With essentially no relevant data between now and then, the task at hand is clear: get in position for the Fed (if you’re not already) and react to any major developments in the banking sector.  Monday’s early trading suggests markets are actually right about where they want to be after a bit of overnight volatility surrounding the UBS takeover of Credit Suisse. Econ Data / Events No significant econ data Market Movement Recap 09:16 AM 10s are currently down 2.6bps at 3.412.  MBS are unchanged (5.0 coupons).  11:27 AM More legitimate weakness after an early bout of illiquidity.  MBD down 3/8ths with at least a quarter point of losses vs AM highs.  10yr yields are up 3.2bps at 3.47. 02:13 PM Weakest levels of the day with MBS down just over half a point and 10yr yields up 5.4bps at 3.492.  Stocks are up about 2/3rds of a percent.

Mortgage Rates and Payments Keep Rising, Creating Market Misery – Kiplinger’s Personal Finance

Mortgage Rates and Payments Keep Rising, Creating Market Misery  Kiplinger’s Personal Finance

How far the Fed’s facility is likely to go in stopping bank MBS woes

The effectiveness of the borrowing facility now available to address the mortgage-backed securities risk that contributed to Silicon Valley Bank’s failure remains to be seen, as it has been tapped for at least $12 billion but institutions are leaning more heavily on other funding sources. But experts are hopeful about its usage. “I think that … [Read more…]

Broker, Efficiency Products; FHA, VA, USDA News; Bank Failures Explained

It hasn’t been a good few weeks for banks whose names begin with “Si” (Silvergate, Silicon Valley, and Signature, with Silicon Valley Bank declaring Chapter 11 bankruptcy this morning; today’s Rundown discusses how the bank crisis may impact lenders). Ah, those clever secondary marketing folks. Cornerstone’s Henry S. frets, “I can’t believe it’s bank collapse season already. I just finished taking down my train derailment decorations.” Certainly, time flies by, and I hope you’re wearing some green today. Originally a religious holiday to honor St. Patrick, who introduced Christianity to Ireland in the 5th century, St. Patrick’s Day has evolved into a celebration of all things Irish, with the first parade on March 17, 1762, in New York City, featuring Irish soldiers who served in the English military. It certainly is more fun to think about celebrating the Irish than the constant stream of headlines as people race to conjecture about the health of world banking, and people crying “shoulda woulda coulda.” The markets seem to be performing a stress test on the Fed. The Federal Reserve’s (Fed’s) tightening seems to be finally having an effect, and an early victim has been smaller banks that did a poor job of managing interest rate and deposit concentration risk. (Today’s podcast can be found here and this week is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology, and other services in the mortgage industry and in banking.)