Further anaylsis of the FOMC statement to follow but wanted to give a quick update. We are having a pretty big rally across the board. Mortgage backed securities are up a full point which in normal times would result in lenders repricing a whole 100 basis points better which would result in a .25% drop in rates. We still have not received any reprices for the better from any lender but we are sure to get some. Lenders will be hestitate to pass along all these gains due to pipeline control but we should see rates drop to 4.625% as par by tomorrow if not later today.
What is sparking the rally was the release of the Fed statement. The Fed stated that they intend to increase the purchases of mbs by up to $750billion more and in addition they will buy up to $300b of longer term treasuries. Most economists expected the Fed to increase buying of mbs but was surprising was the announcement that they will buy US treasuries. On the news, the 10 yr treasury yield fell to low of 2.48 but has since come back up slightly to 2.55. A far cry from where they were earlier today.
So to recap, mbs are rallying but we are still waiting on lenders to pass along the gains. Just because mbs are moving higher in price doesnt mean that lenders have to pass along the improvements but we should see some.