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  • Hello everyone and welcome back to the Mortgage Rundown.

  • Today we are going to talk about this week’s FOMC meeting.

  • As expected the Federal Open Market Committee left the benchmark rate unchanged.

  • The Fed did however announce formal plans to reduce its $4.5 trillion balance sheet.

  • Starting in October the Fed will allow $6 billion in Treasuries and $4 billion in mortgages

  • to run off each month.

  • Every quarter they are going to increase the runoff until $30 billion of Treasuries and

  • $20 billion of mortgages run off each month.

  • The Fed did not give a timeframe for when the runoff would stop and at what level of

  • a balance sheet they will maintain.

  • Conservatively speaking it could take 8 years

  • at that pace to reduce the balance sheet to zero.

  • Now this balance sheet move was widely expected by the market.

  • What surprised the market a tad was that a majority of the FOMC members, in addition

  • to the balance sheet wind down, also want to increase the Fed Funds rate one more time

  • this year (likely in December).

  • So in summary the Fed will start unwinding the balance sheet, which in effect is like

  • slowly raising interest rates, as well as potentially raising rates in December along

  • with the general consensus that they plan to raise rates 3 more times next year.

  • And what was the market’s reaction to all of this news?

  • Rates went up only 2bps.

  • You might be asking yourself why there was such a small reaction by the market.

  • The first thing you have to remember is that we still do not have tax reform, health care

  • reform, an infrastructure spending bill or inflation for that matter.

  • Also keep in mind that while rates are low in the United States, they are generally much

  • lower in other countries around the world, so Treasury and mortgages yields are very

  • attractive to investors.

  • Not to mention the impacts of Hurricanes Harvey and Irma

  • have not filtered through the economic data.

  • In the coming weeks you should keep an eye on the following items:

  • 1. The spread between mortgage and Treasury rates and the impact of the

  • unwinding of the Fed’s balance sheet.

  • You might see mortgages move with more volatility

  • than treasuries but I’ll get more into that next time.

  • 2. Next week brings GDP data from the 2nd quarter as well as Core PCE

  • 3. And lastly any further comments from the Fed

  • in terms of policy for the remainder of the year.

  • If you would like a more in-depth analysis, please visit our blog.

  • Thanks for watching and have a great day.

Hello everyone and welcome back to the Mortgage Rundown.

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B1 中級 美國腔

房貸攻略。2017年9月22日 (Mortgage Rundown: September 22nd 2017)

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