The Fed Announcement and press conference may not have left bonds in hugely different territory today, but the 2pm-3pm hour was one of the wildest 60 minute rides of the year.  It all begin with the very-much-expected 25bp rate cut from the Fed and a slightly less anticipated policy announcement that left very little changed from the previous version.  Markets initially read that as unfriendly for bonds before taking heart from the early termination of the Fed's balance sheet run-off.

Powell brought the pain, and the pleasure, and the pain, and then the pleasure again, in that order, and by increasing degrees.  Simply put, reporters and markets wanted to pin him down on any sort of leaning with respect to rate cut plans in the future.  In the same breath, he gave two completely different answers.  At least, the answers appeared to be different (and markets traded them accordingly).  Realistically, it was just Powell's unfortunately clumsy way of saying "lay off me guys... I can't predict the future.  We cut today.  We'll cut some more if we need to and we won't cut anymore if we don't need to.  Cheers!"

Bonds tanked when Powell said this isn't the start of a rate cut cycle and they rallied just as much when he clarified that he DIDN'T say today's cut was a cycle of "just one."  Details details!

As expected, this leaves a ton of importance on economic data.  One caveat though: economic data abroad will be important because Powell leaned heavily on overseas weakness as justification for the cut.  This could provide some insulation against extra strong domestic economic data.  If today's 44.4 vs 50.6 reading in Chicago PMI is any indication, maybe we need to think more about what extra weak data would suggest?  


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
100-28 : +0-04
Treasuries
10 YR
2.0280 : +0.0070
Pricing as of 7/31/19 7:57PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:06PM  :  And We're Back (in Positive Territory), For at Least a Minute or Two!
2:54PM  :  ALERT ISSUED: Negative Reprices Becoming Likely as Powell Puts Nail in Rally's Coffin
2:43PM  :  ALERT ISSUED: Powell Kills The Rally! (Back to Weakest Post-Fed Levels)
2:14PM  :  Fed Bullet Points, Paraphrased (BONDS RALLYING NOW)
2:02PM  :  ALERT ISSUED: First Move After Fed is Weaker
10:11AM  :  Huge Miss in Chicago PMI Barely Registers

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Leslie Heimer, MBA  :  "wonderful! Thank you for this!"
Hugh W. Page  :  "LH,MBA Matthew Graham: 11:41 am http://housingnewsletters.com/mgraham/5d28f89736cb281c5c7c8889"
Leslie Heimer, MBA  :  "What do you all tell your clients, currently in processing, that think they immediately get a .25% decrease in rate?"
Matthew Graham  :  "FED'S POWELL SAYS HAS NOT SAID THAT TODAY'S RATE CUT WILL BE A CYCLE OF 'JUST ONE' RATE CUT"
Jeremy Harridath  :  ""What are you saying" :)"
Matthew Graham  :  "Powell needs to ditch the canned ham and just say "look... we don't know what's gonna happen. We probably hiked a bit too much by the end of 2018 and now we might dial it back a bit. It could end here or there could be a few more cuts. It really depends on how things are evolving, right? Jeez... lay off me bro!""
Ted Rood  :  "Maybe he'll mention that mortgage rates are too low and should be expected to rise too."
Matthew Graham  :  "RTRS - FED'S POWELL SAYS CURRENT RATE CUT DECISION IS DIFFERENT FROM THE BEGINNING OF A LENGTHY CUTTING CYCLE"
Oliver Orlicki  :  "That last question"
Oliver Orlicki  :  "Ugh"
Matthew Graham  :  "YIKES POWELL"
Paul Martin  :  "Powell speaking is what causes a confidence problem."
Matthew Graham  :  "RTRS - FED'S POWELL SAYS EXPECTS FED CUT WILL HELP ECONOMY THROUGH CONFIDENCE CHANNELS"
Oliver Orlicki  :  "Stocks tanking since presser started"
Matthew Graham  :  "RTRS - FED'S POWELL SAYS RATE CUT IS A MID-CYCLE POLICY ADJUSTMENT"
Matthew Graham  :  "RTRS - FED'S POWELL SAYS FED'S INCREASING POLICY SUPPORT THIS YEAR HAS KEPT ECONOMY ON TRACK"
Oliver Orlicki  :  "Why we popping up"
Matthew Graham  :  "RTRS - FED'S POWELL SAYS CONTINUED BELOW-TARGET INFLATION COULD LEAD TO DOWNWARD SLIDE IN INFLATION EXPECTATIONS"
Matthew Graham  :  "RTRS - FED'S POWELL SAYS FOREIGN GROWTH HAS DISAPPOINTED PARTICULARLY IN EURO AREA AND CHINA"
Matthew Graham  :  "JT's observation on early end to drawdown is the big takeaway, but that's mainly a benefit for Treasuries as written"
Jeff Anderson  :  "It's a trap!"

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Jul 31
7:00 MBA Purchase Index w/e 253.0 260.8
7:00 Mortgage Refinance Index w/e 1791.2 1789.8
8:15 ADP National Employment (k)* Jul 156.0 150 102
9:45 Chicago PMI * Jul 44.4 50.6 49.7
14:00 FOMC rate decision (%)* N/A 2.00 - 2.25 2.125 2.375
14:31 Powell Press Conference *