Phil Grossfield's Blog

A LITTLE EXTRA…

Fed Meets Today – Oathkeeper Jaime Lannister of Game of Thrones

The 30-year Fannie Mae bond is +6bps since yesterday’s close.  Generally a lender’s pricing improves when the bond is being bought.

Today the Fed will reveal a statement and everyone will be paying close attention to whether the Fed intends to raise interest rates sooner or later.  Everyone agrees the Fed will pull the trigger eventually…but when?  And when they reveal their plan, how will the markets react?  Will investors invest or sell off bonds? stocks? both? neither?

I’ve read/discussed varying opinions on what the Fed might do…seems most think the Fed will hold off for a couple of more months and will use language to make that clear.  MBS Highway is looking for a specific word, “patience.”  it’s their opinion

that if the mere word is used in the Fed’s statement it will mean we will see at least 3 more months of unchanged monetary policy but if they omit the word things could change instantly.    Who knows…maybe their right…they do a pretty good job of predicting these sorts of things.

However, I feel that what they say today will have no impact on what they say next month. It’s not like their words are an oath worthy of Jaime Lannister from Game Of Thrones. What they say tomorrow may completely contradict what they say next month. I wish I could advise which way rates are likely to swing this afternoon…I usually give my opinion, but I sincerely have no idea. In fact, even if I knew what they were going to say, I’m not certain how the markets would react. It’s a typical wait-and-see situation…

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