The Fed reduced asset purchases by another $10 billion today and bond markets rallied handsomely. These two concepts have heretofore been diametrically opposed, but find paradoxical synergy through the grace of the emerging market sell-off.
In plain English now... Until now, the more the Fed tapers or is expected to taper, the worse it has been for bond markets. Then today, the Fed tapered by another $10 billion and bond markets rallied because tapering is theoretically hurting emerging markets and other risk assets, and those losses are theoretically benefiting bond markets.
Ergo, tapering helped bond markets today. Go figure. That said, it may be a fairer assessment to say that tapering was widely expected today and failed to stem the tide of an emerging-market/equities sell-off that was already in progress. Most of the day's gains came well before the FOMC Announcement--itself seen as a long-shot to give those risk markets a boost if the Fed happened to hold off this time. As such the tapering status quo simply allowed the prevailing trends to continue. It may not be pretty, but it gets bond markets to their best levels in over 2 months.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
| MBS || |
96-28 : +0-11
101-06 : +0-10
104-19 : +0-08
| Treasuries || |
0.3554 : +0.0114
2.6767 : -0.0713
3.6180 : -0.0540
| Pricing as of 1/29/14 5:35PMEST |
Today's Reprice Alerts and Updates
3:04PM : ALERT ISSUED: Back to Best Levels after FOMC Knee-Jerk
2:16PM : Still More Volatility Than Directionality Following Fed
2:07PM : ALERT ISSUED: First Move is Weaker Following FOMC
1:01PM : Bond Markets hit Best Levels in 2 Months
MBS Live Chat Highlights
William McGuirt : "may have missed this earlier but CNBC seems to think there is a chance of no taper? Comments"
William McGuirt : "If there is a taper, will have a broader impact on emerging markets and more volatility which could could help rates??"
Matthew Graham : "WM, I think there's been a chance of no taper regardless of emerging markets. I don't think it's been the more likely outcome though."
Victor Burek : "fed has said all along, more taper is data dependent, the question is has the data been bad enough to not taper more"
Matthew Graham : "The EM hullabaloo tacitly suggests that more tapering could continue to fuel the flight-to-safety, so if you buy into that explanation, then bonds can't lose today. Seems too good to be true to me though. "
William McGuirt : "that was my last point or thought MG"
Hugh W. Page : "Fed can't stop after 1 month. Sends a bad message either way. 1) Economy is worse than we thought 2) We didn't really know what we were doing last month"
Jeff Anderson : "I think it's win/win today also. I think they taper another $10 bill and we're status quo to better. Or they don't taper and we improve more. Only downside risk I'd think is if they taper more then another $10b which isn't likely, IMO."
Brent Borcherding : "There is no reason to move away from their initial plan of $10B a month, as of yet."
Matt Hodges : "personally don't think there's enough "bad" to slow down the aircraft carrier's turn"
Matthew Graham : "RTRS- FED SAYS TO REDUCE BOND BUYING TO $65 BILLION PER MONTH, SPLIT AS $30 BLN MBS AND $35 BLN TREASURIES "
Matthew Graham : "RTRS- FED REPEATS WILL HOLD RATES NEAR ZERO AS LONG AS JOBLESS RATE ABOVE 6.5 PCT, PROJECTED INFLATION NOT MORE THAN 2.5 PCT "
Matthew Graham : "RTRS- FED REPEATS LIKELY TO KEEP FED FUNDS RATE AT 0-0.25 PCT WELL PAST TIME JOBLESS RATE FALLS BELOW 6.5 PCT, ESPECIALLY IF PROJECTED INFLATION BELOW 2 PCT "
Matthew Graham : "RTRS- FED REPEATS WILL LIKELY FURTHER REDUCE ASSET PURCHASES IN MEASURED STEPS IF LABOR MARKET IMPROVING, INFLATION MOVING TOWARD OBJECTIVE "
Matthew Graham : "RTRS - FED SAYS ECONOMIC ACTIVITY PICKED UP IN RECENT QUARTERS, LABOR INDICATORS MIXED BUT ON BALANCE SHOWED IMPROVEMENT "
Matthew Graham : "RTRS - FED AFFIRMS HIGHLY ACCOMMODATIVE POLICY TO BE APPROPRIATE FOR CONSIDERABLE TIME AFTER ASSET PURCHASE PROGRAM ENDS "
Matthew Graham : "RTRS- FED REPEATS PURCHASES NOT ON PRE-SET COURSE, REMAIN CONTINGENT ON OUTLOOK AND ASSESSMENT OF EFFICACY, COSTS "
Andrew Horowitz : "stock lever folks"
|Time ||Event ||Period ||Actual ||Forecast ||Prior |
|Thursday, Jan 30 |
|8:30 || GDP Final (%) || Q4 || || 3.2 || 4.1 |
|8:30 || Initial Jobless Claims (k)* || w/e || || 330 || 326 |
|8:30 || Continued jobless claims (ml)* || w/e || || 3.020 || 3.056 |
|10:00 || Pending sales change mm (%) || Dec || || 0.0 || 0.2 |