The Fed had a chance to soothe the stock market today by doing "something dovish" with respect to monetary policy or even forward guidance.  "Something dovish" might have looked like any of the following:

  • abstaining from hiking rates (which was never really going to happen)
  • making some adjustment to their reinvestment policy (slightly more within the realm of possibility)
  • SAYING something reassuring about the economy and the friendly path of interest rates or bond-buying (totally possible)

The Fed did none of the above.  In fact, they said disconcerting things about the economy (granted, nothing too severe) in their economic projections, calling for slower growth in 2019 and stagnant inflation.  While they did decrease their rate hike outlook pace, it wasn't by as much as the stock market would have hoped--especially in light of the downgraded view of the economy and increased monitoring of risks.

Bonds probably wouldn't have cared either way.  The Fed was roughly in line with bond market expectations.  But stocks cared a lot!  They set the tone for a strong bond rally as they fell to the lowest levels since October 2017.  

By the end of the day, 10yr yields were as low as they've been since April 2018 (2.76%).  This is probably the only pivot point everyone could agree on once 10s broke under 2.82% convincingly.  The next one down would be 2.72%.  MBS didn't have nearly as nice of a day, rising only an eighth of a point in price compared to 10yr Treasuries rising more than half a point.  


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 4.0
101-18 : +0-03
Treasuries
10 YR
2.7600 : -0.0630
Pricing as of 12/19/18 4:56PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:00PM  :  Powell NOT Pushing Back; Lowest Yields in 6 Months!
2:20PM  :  Paraphrased Fed Bullets... Dots and Stocks
2:04PM  :  Bonds Weaken At First; Now Bouncing Back
1:57PM  :  ALERT ISSUED: Unfortunately, There's Some Reprice Risk Before The Fed
11:05AM  :  Some Weakness After NYSE Open, But Finding Support

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "
New MBS Huddle Released
Discussing Big Reaction to Fed and How it Changes Lock/Float Strategy"
Matthew Graham  :  "FED'S POWELL SAYS THERE IS A FAIRLY HIGH DEGREE OF UNCERTAINTY ABOUT PATH OF RATES"
Matthew Graham  :  "FED'S POWELL SAYS WE'VE REACHED THE BOTTOM END OF RANGE OF COMMITTEE ESTIMATES FOR NEUTRAL RATE"
Matthew Graham  :  "FED'S POWELL SAYS DOESN'T SEE FED CHANGING POLICY OF KEEPING BALANCE SHEET RUNOFF ON AUTO PILOT"
Matthew Graham  :  "RTRS - FED'S POWELL SAYS INFLATION'S RECORD OF COMING IN A BIT BELOW TARGET GIVES FED ROOM TO BE PATIENT"
Matthew Graham  :  "RTRS - FED'S POWELL SAYS MONETARY POLICY WILL BE PROVIDING A SMALLER BOOST TO THE ECONOMY IN 2019"
Matthew Graham  :  "c'mon man"
Oliver Orlicki  :  "Hows volume MG"
Oliver Orlicki  :  "stocks tanking"
Tim McNerney  :  "right full rudder!"
Bert Swyers  :  "wow this is some serious action"
Victor Mendoza  :  "I feel like the captain on Red October ready to launch the missiles. Finger on the button."
Dennis Vo  :  "The Xmas tree isn't the only thing lighting up right now!"
Caroline Roy  :  "i think i have whiplash"
Matthew Graham  :  "MBS buyers are nowhere to be found. They'll come back in a sec"
Bert Swyers  :  "whats going on with MBS"
Matthew Graham  :  "FED SAYS INFLATION NEAR TARGET WITH EXPECTATIONS LITTLE CHANGED"
Matthew Graham  :  "FED LOWERS ESTIMATE OF LONG-RUN FED FUNDS RATE TO 2.8 PCT FROM 3.1 PCT PREVIOUSLY, WITH RATES SEEN HALTING AT 3.1 PCT IN 2020 VS 3.4 PCT IN PREVIOUS PROJECTION"
Matthew Graham  :  "FED SAYS ECONOMY, LABOR MARKET REMAIN STRONG BUT EXPECTS GROWTH TO SLOW TO 2.3 PCT IN 2019 VS 3.0 PCT THIS YEAR, INFLATION WEAKER AT 1.9 PCT"
Matthew Graham  :  "FED RAISES TARGET INTEREST RATE TO 2.25-2.50 PCT, REDUCES EXPECTED HIKES FOR 2019 TO TWO FROM THREE"
Matthew Graham  :  "- FED SEES SLIGHTLY LOWER ECONOMIC GROWTH AND INFLATION IN 2019 COMPARED WITH SEPTEMBER PROJECTIONS"
Matthew Graham  :  "MEDIAN FORECAST OF FED POLICYMAKERS IS FOR A TOTAL OF TWO RATE HIKES IN 2019, ONE IN 2020"
Matthew Graham  :  "MEDIAN VIEW OF APPROPRIATE FEDERAL FUNDS RATE AT END-2019 2.875 PCT (PREV 3.125 PCT): END-2020 3.125 PCT (PREV 3.375 PCT); END-2021 3.125 (PREV 3.375); LONGER-RUN 2.750 PCT (PREV 3.000 PCT) - FED PROJECTIONS"

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Dec 19
7:00 MBA Purchase Index w/e 238.6 256.1
7:00 Mortgage Refinance Index w/e 832.2 851.6
10:00 Exist. home sales % chg (%)* Nov +1.9 -0.6 1.4
10:00 Existing home sales (ml)* Nov 5.32 5.20 5.22
14:00 FOMC rate decision (%)* N/A 2.375 2.375 2.125
14:31 Powell Press Conference *
Thursday, Dec 20
8:30 Philly Fed Business Index * Dec 15.0 12.9
8:30 Jobless Claims (k) w/e 216 206