Earlier today Victor Burek said “I think they copy/paste last statement” on the MBS Live Dashboard. Although the Fed was widely expected to leave this statement relatively unchanged, few could have guessed how accurate Victor’s prediction would be. This was the LEAST changed FOMC statement we can remember seeing. Even some parts that seemed new were thinly-veiled rewordings. Case in point, what once was:
“there are significant downside risks to the economic outlook, including strains in global financial markets. ”
“Strains in global financial markets continue to pose significant downside risks to the economic outlook. ”
Well played FOMC! Heaven forbid you actually don’t change the darn thing at all. At least this way, folks who only glance at the shapes of the letters will see some in different places and assume that changes have been made.
But it wasn’t long until such folks got calls from their more meticulous friends and learned that nothing really changed. Thus, time to sell stocks, and give bond markets the “all clear!” As far as 10yr yields are concerned, this seems to be taking shape as a test of the mid 1.9’s, with 1.95 being a relatively cliche technical target.
But the level that 10’s ultimately achieve this afternoon is of little consequence to a much-relieved and newly liquid MBS market (class A settlement over and done-with) that is simply soaring either way. Positive reprices are as likely as they’ve been all day (among lenders who haven’t repriced already).