Posted To: MBS Commentary
The Fed has been more than clear that it will announce a reduction in bond purchases today. This has been part of the bond market’s destiny from the moment QE4 began in March 2020. Winding it down was only a matter of time and in all likelihood, the Fed would have pulled the trigger sooner if it could have predicted labor market dynamics more accurately. With tapering a foregone conclusion, does it even matter anymore? As far as tapering itself is concerned, no. The longer end of the yield curve (the stuff we care about in the mortgage market) has already priced tapering in. The shorter end of the yield curve (5yr and under) has been taking the most damage as the tapering realization pulls the Fed’s rate hike outlook forward. One aspect of tapering that could matter would be the pace…(read more)
