Bond markets began the day like most recent days: flat and uninspired.  That wasn't too hard to forgive considering we may well expect some indecision before something like an FOMC Announcement.  The first shock of the day arrived at 10am when oil prices simply 'decided' to spike (half an hour BEFORE the 10:30am inventory data).  Bond yields followed, but the selling remained manageable at first.

Then the 5yr auction came out much weaker than expected, but again, bond markets weathered the storm with relative aplomb. 

It wasn't until the Fed announcement that things went pear-shaped.  Long story short, the Fed took the opportunity that we'd been discussing and inserted verbiage that specifically warned about a December rate hike.  Sure, it's a bit of a conclusion to jump to when you read the actual words,

"in determining WHETHER IT WILL BE APPROPRIATE TO RAISE THE TARGET RANGE AT ITS NEXT MEETING," was added in lieu of "in determining how long to maintain this target range."

but if we consider the fact that this is the first time they've ever specifically addressed the ensuing meeting as a rate-hike candidate, AND when that occurred in light of fairly crappy economic data since the last meeting, it seems like a pretty clear message.  The Fed wants to hike and they're not going to tell us why (they'll give us reasons, but their reasons make no sense.  And THAT'S what's scary about it).

Bond markets agreed--especially 2-5yr yields.  MBS and 10yr Treasuries got plenty of aftershock with Fannie 3.0s down nearly a half point by the close.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
101-08 : -0-15
FNMA 3.5
104-06 : -0-14
FNMA 4.0
106-16 : -0-10
Treasuries
2 YR
0.7070 : +0.0860
10 YR
2.1010 : +0.0640
30 YR
2.8780 : +0.0200
Pricing as of 10/28/15 5:43PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:15PM  :  Here's Why Markets Are Reacting Like This to The Fed
2:02PM  :  ALERT ISSUED: Negative Reprice Risk Increases Again After Fed
1:42PM  :  ALERT ISSUED: Slight Increase In Negative Reprice Risk Ahed of Fed
10:49AM  :  ALERT ISSUED: Negative Reprice Risk Increasing Ahead of Fed
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - U.S. RATES FUTURES IMPLY TRADERS NOW SEE 81 PCT CHANCE OF U.S. RATE INCREASE IN JUNE 2016, UP FROM 73 PCT BEFORE FOMC STATEMENT"
Matthew Graham  :  "RTRS - U.S. RATES FUTURES IMPLY TRADERS NOW SEE 69 PCT CHANCE OF U.S. RATE INCREASE IN MARCH 2016, UP FROM 59 PCT BEFORE FOMC STATEMENT"
Matthew Graham  :  "RTRS - U.S. RATES FUTURES IMPLY TRADERS NOW SEE 55 PCT CHANCE OF U.S. RATE INCREASE IN JAN 2016, UP FROM 44 PCT BEFORE FOMC STATEMENT"
Matthew Graham  :  "RTRS - U.S. RATES FUTURES IMPLY TRADERS NOW SEE 47 PCT CHANCE OF U.S. RATE INCREASE IN DEC, UP FROM 34 PCT BEFORE FOMC STATEMENT"
Matthew Graham  :  "they want to hike, China gave them pause. they're over it."
Matthew Graham  :  "but I'll temper my certainty accordingly and say the Fed has left their door to hike in December infinitely open, and in fact seems to be moving in that direction based on the warning shot in the forward guidance paragraph"
John Tassios  :  "markets had pushed FED hikes way back, so this trade is now coming out in markets. Longer end TSY's will look attractive to investors in a inflationless world environment."
Sung Kim  :  "so market interprets as hawkish"
Sung Kim  :  "short end getting smashed compared to long end"
John Tassios  :  "This hawkish stance will raise USD, push down oil, commodties, push Euro lower, and longer term TSY's ( and MBS ) should outperform"
Christopher Stevens  :  "I'd say that stmnt is a bit hawkish...household and business spending increased at a 'solid' pace v. 'moderate' pace used in last stmt."
John Tassios  :  "It's more hawkish than last stmt, plus global risk stmt is gone, and econ expanding at "Moderate" pace - all leaves December as a possibility"
Dominick Cordone  :  "why are we tanking again?"
Matthew Graham  :  "RTRS - FED SAYS MARKET-BASED MEASURES OF INFLATION COMPENSATION MOVED SLIGHTLY LOWER; IN PREVIOUS STATEMENT FED HAD SAID THEY HAD MOVED LOWER"
Matthew Graham  :  "RTRS- FED REPEATS IT WILL RAISE RATES WHEN IT HAS SEEN SOME FURTHER IMPROVEMENT IN LABOR MARKET AND WHEN IT IS "REASONABLY CONFIDENT" INFLATION WILL MOVE BACK TO ITS 2 PCT TARGET"
Matthew Graham  :  "RTRS FED REPEATS INFLATION CONTINUES TO RUN BELOW OBJECTIVE, PARTLY REFLECTING DECLINES IN ENERGY PRICES AND PRICES OF NON-ENERGY IMPORTS"
Matthew Graham  :  "RTRS - FED SAYS HOUSEHOLD SPENDING, BUSINESS FIXED INVESTMENT INCREASING AT SOLID RATES, HOUSING SECTOR IMPROVED FURTHER, NET EXPORTS SOFT"
Matthew Graham  :  "RTRS- FED SAYS ECONOMIC ACTIVITY EXPANDING AT MODERATE PACE"
Matthew Graham  :  "RTRS- FED SAYS SEES RISKS TO OUTLOOK FOR ECONOMIC ACTIVITY, LABOR MARKETS NEARLY BALANCED BUT IS MONITORING GLOBAL ECONOMIC AND FINANCIAL DEVELOPMENTS"
Matthew Graham  :  "RTRS- FED LEAVES KEY POLICY RATE UNCHANGED AT 0-0.25 PCT"
Matthew Graham  :  "RTRS- FED SAYS PACE OF U.S. JOB GAINS SLOWED, JOBLESS RATE STEADY, BUT UNDERUTILIZATION OF LABOR RESOURCES HAS DIMINISHED"