The FOMC meeting from August 10th remains a puzzle for the ages. It took a day to settle in, but the market got spooked by what can only be described as some of the worst FOMC communication policy in history! By cob August 11th spoos had dropped from 1120 to 1080 and 10yr USTs fell […]

Agency mortgage speeds were out last night so it’s time to look at what the Fed will lose. Based on our estimates of the current SOMA MBS holdings (see page 9 of the Monthly for our most recent numbers), the SOMA will pay down about 18b with 1bio in 4s, 7bio in 4.5s, 6bio in […]

As promised I am back with some mortgage data for everyone to chew through. As regular readers are aware, there is one chart that I believe continues haunt the prospects for a US recovery. That is the first chart attached and it shows that even as the funds rate has fallen 525bps since 2007/8, the […]

This is the key passage from the minutes on the thought process driving the reinvestment strategy decision – “members generally saw both employment and inflation as likely to fall short of levels consistent with the dual mandate for longer than had been anticipated. Against this backdrop, the Committee discussed the implications for financial conditions and […]

I have gone back over “the speech” a couple times this weekend. Given all the confusion post the 10-Aug FOMC meeting, I think this speech deserves at least a couple of reads - at the moment it is our clearest read into current FOMC thinking. As I pointed out on Friday we finally saw a […]

There is nothing here to comfort risk markets. The Fed is going to buy more Treasuries as a means to ease “if needed”. He presented 4 possible easing choices - 3 of which are basically worthless in my opinion: buying more USTs, communication (i.e. moving to a “really extended” period), lowering the IOER to 10bps […]

I want to start with a quote from Ben in 2003 that I used in yesterday’s commentary. I’m repeating it today because it is VERY important – “when nominal interest rates are at or near zero, the central bank can lower the real rate of interest only by creating expectations of inflation on the part […]

I think the August 10th FOMC meeting will go down as one of the top 10 mistakes in Fed history! The move to make Treasury replacements of MBS pay downs was one of the poorest signaling moves I can ever remember. It is still unclear to me what they were trying to do/signal – and […]

US Corporates, US Banks and most foreign institutions are borrowing dollars at rates that are many hundreds of basis points lower than they were pre-crisis. There is however one funding rate that remains unchanged throughout this period. I highlighted it in the August monthly and I am highlighting it again as I think it is […]

Suppose the Congress controlled the production of all the lemons in US. Then assume the Federal Reserve decided that it was going to use its balance sheet to buy lemons as a means of adding liquidity into the market when times were tough. While the government ramped up lemon production during tough times, the Fed […]