Should I lock or float?  Should I be advising clients to lock or float?  Is the Fed going to help or hurt rates? 

2 of these 3 common pre-Fed questions are easier to answer on days like today.  Rate sheets (if you were lucky) came out in decent enough territory and MBS have sold off since then.  Reprices followed.  MBS Live members received ample warning, and if they or their clients were on a fence about locking ahead of the Fed, the impending reprices makes it an easier call.

The thing we can never know about the near-term future is what the Fed will do to rates today.  Even if bonds sold off much more in the next hour or rallied to the best levels of the year, the Fed always has the chance to completely change the reality that existed up to that point.  That might sound dramatic, but we've seen it happen on more than one occasion in the past few years.  Furthermore, it tends to happen more reliably at times when major policy shifts are at stake. 

All that having been said, to be fair to the Fed, it's not really that they are saying crazy things to move markets.  They're simply addressing the reality that is coming regardless of their words today.  For instance, when Bernanke spoke about tapering in March (ignored by markets) and then again in May and June 2013, it wasn't as if the Fed was intentionally trying to cause volatility.  They were simply adjusting policy to fit the economic reality.  It's markets' choice to wait for the Fed to confirm the consensus reality (which is that a rate hike is coming in September or Dec).

Because of that consensus, there's some analysis making the rounds suggesting the Fed could only surprise in a dovish way (good for rates).  Folks thought that tapering consensus had already been priced in to markets in June 2013 as well (i.e. "surely the Fed won't add any more insult to this injury of drastically rising rates over the past 6 weeks!!).  Just sayin...