Today's Fed announcement wasn't appreciably different than most economists, traders, and armchair analysts expected.  They confirmed the inception of the balance sheet normalization plan.  They referenced temporary impacts from hurricanes.  They didn't get overly-optimistic about the economy or inflation.  

But markets didn't put their trading pants on today thinking about how the Fed announcement would read.  Traders wanted to see THE DOTS (a reference to the "dot plot" the Fed uses to convey its quarterly update to rate hike expectations.

Based on the past 2 months of fairly dovish Fed speeches, lackluster inflation data, downgraded growth forecasts, and various non-data-related risks for the economy, market participants figured the Fed would cool its jets compared to June's rate hike outlook.  While the outlook was a bit less aggressive, the consensus among traders is that the Fed didn't cool their jets nearly as much as expected.  

The reaction was swift, even if it wasn't exceptionally huge.  Fed funds futures spiked, shifting a 50/50 outlook for a December rate hike to 72% in short order.  Treasuries and MBS followed the rate hike expectations.  End of story.

Is this a last hurrah for September's ugly little correction?  I think there's a bigger risk that today's Fed events keep the ugliness intact.  Bond buyers obviously weren't thrilled to see the 2.28% technical level in 10yr yields, so they may be holding out for a lower-priced (read: "higher yield") entry point, perhaps somewhere in the 2.3's.  A lot depends on what overseas markets do with the news tonight and early tomorrow morning.


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
103-03 : -0-04
Treasuries
10 YR
2.2729 : +0.0299
Pricing as of 9/20/17 5:27PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:26PM  :  Some Thoughts on The Fed Announcement/Forecasts
2:10PM  :  ALERT ISSUED: Negative Reprices Increasingly Likely
2:01PM  :  ALERT ISSUED: First Move After The Fed is Weaker; Negative Reprice Risk
9:59AM  :  Little-Changed After the NYSE Open

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - FEDERAL FUNDS FUTURES IMPLY TRADERS SEE 72 PCT FED RAISING RATES AT DEC 12-13 POLICY MEETING VS 52 PCT BEFORE FED STATEMENT, FORECASTS - CME GROUP'S FEDWATCH TOOL"
Matthew Graham  :  "vb nailed it"
Victor Burek  :  "i think market was expecting dots to turn more dovish, but they didnt"
Matt Hodges  :  "how is the statement any different than expected?"
Victor Burek  :  "not as dovish as hoped"
Matthew Graham  :  "RTRS- FED SAYS INFLATION TO RISE TEMPORARILY IN AFTERMATH OF HURRICANES"
Matthew Graham  :  "RTRS- FED'S PROJECTIONS POINT TO THREE RATE HIKES IN 2018, TWO IN 2019 AND ONE IN 2020"
Matthew Graham  :  "RTRS - FED SAYS TO START SHRINKING BALANCE SHEET IN OCTOBER FOLLOWING SCHEDULE IT LAID OUT IN JULY"
Matthew Graham  :  "RTRS - ELEVEN OF 16 FED POLICYMAKERS SEE ONE MORE RATE HIKE IN 2017 COMPARED WITH 8 IN JUNE"
Matthew Graham  :  "RTRS - MEDIAN VIEW OF APPROPRIATE FEDERAL FUNDS RATE AT END-2017 1.375 PCT (PREV 1.375 PCT); END-2018 2.125 (PREV 2.125 PCT): END-2019 2.688 (PREV 2.938 PCT); END-2020 2.875; LONGER-RUN 2.750 PCT (PREV 3.000 PCT) - FED PROJECTIONS"
Matthew Graham  :  "RTRS - FED LEAVES TARGET INTEREST RATE UNCHANGED AT 1.00-1.25 PCT , STILL SEES ONE MORE RATE HIKE IN 2017"
Matthew Graham  :  "Tomorrow will be more telling. It's slightly disconcerting to be moving higher in rate, but yes, 2.28% is a technical support level, and in the bigger picture, if we don't break much above it, this will end up looking like a quick head-fake toward higher rates. All this having been said, I personally think the Fed statement and the dots are worth a bit more weakness than we're currently seeing, but if you want to be scientific about it, make the market prove that before you assume I'm right. Your only risk in that regard would be how overseas markets handle it tonight."