• Translating Yellen's speech today: not only is the Fed "data dependent," but it doesn't take much to deter hikes and even to contemplate ways to ease if rates fall back to zero
  • Stocks and bonds both liked it a lot.
  • The end

Last year, one of the top sound bytes out of the Fed was that it would remain "data dependent" in assessing how and when to raise rates.  Indeed, various iterations of the same concept have pervaded almost any FOMC communication for quite some time.  But in the earlier days of the Fed's use of that phrase, markets didn't take them at their word.  I know I didn't--at least not to the extent they seemed to be advocating.

At issue was the fact that other parts of the overall monetary policy thesis seemed downright biased toward raising rates regardless of the incoming financial data.  Fed speakers were saying things like 'zero rates are for a financial crisis and we're not in a crisis anymore.'  Couple that with the fact that the economic data could slide quite a bit without bringing the economy anywhere near the crisis that prompted zero rates and it was a recipe for confusion.  

Now we're getting more and more evidence that clears up the confusion.  Here we are with some recent economic events and data that paint a slightly less rosy economic picture (but, by no means even come close to the data associated with the financial crisis) and the Fed is noticeably hesitant to continue talking tough about future rate hikes.  

Today's speech from Fed Chair Janet Yellen served as a major opportunity to confirm the Fed's dovish stance at the last meeting or to begin prepping markets for the possibility of a rate hike at the April or June meeting.  Yellen opted for the dovish path, to say the least, and even mentioned that the Fed had tools to provide accommodation even at zero rates.  ("So the Fed is thinking about the imminent possibility of zero rates enough to mention it after just having begun to raise rates a few months ago?" every financial market participant said to him/herself).

The unabashedly dovish tone was all it took for stocks and bonds to go on relative rampages to their best recent levels.  We'll have to wait and see "who wants it more" in the rest of the week.


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
102-12 : -0-01
Treasuries
10 YR
1.8040 : -0.0680
Pricing as of 3/29/16 5:40PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:26PM  :  Bonds Surge After Yellen's Speech is Released
9:59AM  :  Tradeflow-Motivated Rally Ahead of Consumer Confidence

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Brian Bockholdt  :  "Correct Raul. If we open flat tomorrow we will see rate sheets still improve. But if we open weak we'll never see the gains at all"
Raul Lopez  :  "We will not see all gains passed on to rates sheets until tomorrow won't we?"
Brian Bockholdt  :  "If we close holding these gains I'd be a little surprised to see green tomorrow. Seems a little pull back would be typical.. Unless stocks and oil take a beating."
Oliver Orlicki  :  "tomorrow adp comes out better than expected and all is well with economy"
Brent Borcherding  :  "Considering the fragility of the economy, the best short to near term outcome is that the fed raised a quarter and doesn't go up or down any time soon. That would mean they managed it properly."
Ted Rood  :  "Yes, inflation is lurking, could hit Fed targets any decade now."
Brian McFarlane  :  "we are not lower, because people listen to guys like this. http://www.marketwatch.com/story/feds-williams-sees-us-inflation-hiring-underestimated-2016-03-29"
aaron meyer  :  "sub 1.83 is good"
Oliver Orlicki  :  "this is what it sounds like when the doves cry"
Matthew Graham  :  "RTRS - YELLEN SAYS CURRENT NEUTRAL REAL INTEREST RATE LIKELY CLOSE TO ZERO BUT WILL RISE AS ECONOMY IMPROVES, ALLOWING GRADUAL INCREASES TO FED TARGET RATE"
Matthew Graham  :  "RTRS - YELLEN SAYS GLOBAL RISKS REMAIN, INCLUDING UNCERTAINTY OVER CHINA AND PATH OF OIL PRICES"
Matthew Graham  :  "RTRS - YELLEN: STILL TOO EARLY TO SAY IF RISE IN INFLATION IS DURABLE, LIKELY TO REMAIN BELOW FED TARGET THIS YEAR"
Matthew Graham  :  "RTRS - GLOBAL DEVELOPMENTS, RISKS, LED POLICYMAKERS TO PROJECT SLOWER PATH OF RATE HIKES THAN INITIALLY EXPECTED IN DEC - YELLEN"
Matthew Graham  :  "RTRS - YELLEN SAYS IF NEEDED FED HAS TOOLS TO PROVIDE ACCOMMODATION EVEN IF RATES RETURN TO ZERO"
Matthew Graham  :  "RTRS - FED'S YELLEN SAYS GIVEN RISKS TO OUTLOOK, APPROPRIATE FOR FED TO PROCEED "CAUTIOUSLY" WITH RATE HIKES"