In a weird way, today's Fed announcement came out right at 8:30am when Core CPI dropped to 1.7%, falling well short of the 1.9% median forecast (year-over-year).  While the Fed prefers PCE as an inflation metric, the two tend to hang out pretty close to each other.  

In either case, the Fed would like to see year-over-year core inflation at 2.0% or more before it can truly justify an aggressive removal of accommodation.  Add to the tame inflation data a negative reading on Retail Sales and an investor could be forgiven for wondering if the Fed would have to address the potentially disconcerting turn in the econ data recently.

The Fed's approach was to acknowledge the inflation data, but to hike anyway.  It probably would have caused more drama to keep rates unchanged considering the nearly universal expectation for a rate hike among investors.  It was a gimme, in other words.  

And when you're hiking rates, it doesn't make much sense to take a lot of time talking about why you shouldn't be hiking rates.  So they didn't.  Instead, they said things should get better.  It was an uncomfortable juxtaposition of econ data and monetary policy, to say the least. 

Markets didn't do too much to take the Fed at their word.  After all, their words didn't make much sense in light of this morning's data.  It's not that 2 isolated reports are game-changers here, but they certainly add to a growing narrative of slightly weaker data and persistently intractable inflation.  

Rates rose slightly following the Fed Announcement, likely because they unveiled their reinvestment exit plan and because they didn't dial back their rate hike outlook at all compared to the December forecasts.  But the weakness was limited, and bonds ended up closing at the best levels of the year in spite of the Fed squeezing as much hawkishness as possible into today's events.  Draw your own conclusion about the results versus the inputs, but at the very least, this is among the strongest possible results for today's calendar events.


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 3.5
103-10 : +0-10
Treasuries
10 YR
2.1273 : -0.0797
Pricing as of 6/14/17 5:33PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:19PM  :  ALERT ISSUED: Negative Reprices Increasingly Possible, but Risks Vary Considerably by Lender
2:33PM  :  Highlighted Changes and Quick Thoughts on Fed Verbiage
2:19PM  :  ALERT ISSUED: Negative Reprice Risk Increasing for a Few Lenders
2:03PM  :  First Move Following Fed is Weaker, But May Already Be Bouncing
1:16PM  :  Have You Heard About The MBS Live "Huddle?"
9:16AM  :  Yields Just Officially Hit 2017 Lows
8:42AM  :  Swing and a Miss For Econ Data (Bonds Like It!)

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Tassios  :  "i'm floating 30 day + customers. Anything less than 30 - i took advantage of today's gains and locked"
Andy Pada, Jr.  :  "everyone lock up?"
John Tassios  :  "big disconnect between FED Dot Plots and Bond Mkt expecations ofFED moves"
John Tassios  :  "Don't think FED stmt will reverse gains. Bond mkt been signaling for months possible slowdown in inflation and growth."
Victor Burek  :  "if floating any loans, i would be prepared to lock, but i am optimistic"
Victor Burek  :  "sure"
Jon Holifield  :  "So should we be nervous about today's meeting possibly reversing this morning's gains?"
Hugh W. Page  :  "So a drop of the word transitory would be dovish."
Victor Burek  :  "JPM expects the Fed statement to drop the reference in the first paragraph to the recent data softness as "transitory""