Today brought the (not very) much-anticipated FOMC Minutes--a more detailed account of the conversation that transpired at the end of July when the Fed announced its rate cut.  As expected, some at the Fed wanted to cut more.  Some wanted to cut less.  The consensus was that it was a mid-cycle rate adjustment that left room for the Fed to hike again or cut again depending upon how conditions evolve.

This was perhaps somewhat less upbeat than some market participants may have hoped, but not so much so that we should credit the Fed as a market mover today.  I'm more inclined to give the Fed some credit for nudging rate expectations microscopically higher and give the consolidation range credit for turning away the post-Fed rally in 10yr yields.  To be clear, this is exactly in line with my pre-Fed outlook update that pointed out a divergence in Fed Fund Futures and the 10yr (this one).

2019-8-21  close

The chart above paints the consolidative picture that matters.  If yields move much above 1.62%, we can talk about the possibility of additional weakness making a dent in the new rate narrative.  Even then, it would take a lot more weakness before we could agree that the new range is being rejected.

On a positive note, MBS lost much less ground than Treasuries.  On a negative note, when those losses were combined with yesterday afternoon's losses, it was enough for a few lenders to move up to their highest rate offerings in well over a 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
101-18 : -0-04
Treasuries
10 YR
1.5910 : +0.0320
Pricing as of 8/21/19 5:32PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:07PM  :  ALERT ISSUED: MBS Off About an Eighth From Post-Fed Highs
2:12PM  :  Limited Reaction to Fed Minutes
12:39PM  :  Bonds Not Planning on Being Impressed by Fed Minutes

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Ira Selwin  :  "so you're saying there's a chance"
Matthew Graham  :  "RTRS - FEDERAL FUNDS FUTURES IMPLY TRADERS SEE 98% CHANCE OF A 25 BPS RATE CUT AT FED'S SEPT 17-18 POLICY MEETING - CME GROUP'S FEDWATCH"
Alan Goldstein  :  "So they have no idea what to do. Great."
Matthew Graham  :  "IN FRAMEWORK DISCUSSION, PARTICIPANTS SAID FORWARD GUIDANCE AND QUANTITATIVE EASING MAY NOT BE ENOUGH TO ELIMINATE RISK OF PROTRACTED PERIODS IN WHICH ZERO LOWER BOUND HINDERS POLICY"
Matthew Graham  :  "IN FRAMEWORK DISCUSSION, SEVERAL POLICYMAKERS SAID UNCERTAINTIES REMAINED ABOUT EFFICACY OF QE"
Matthew Graham  :  "IN FRAMEWORK DISCUSSION, A NUMBER OF POLICYMAKERS SAID FED COULD HAVE BEEN MORE AGGRESSIVE WITH QUANTITATIVE EASING"
Matthew Graham  :  "A FEW POLICYMAKERS EXPRESSED CONCERN OVER PERSISTENT INVERSION OF 3-MONTH/10-YEAR YIELD CURVE"
Matthew Graham  :  "POLICYMAKERS WHO FAVORED RATE CUT POINTED TO DECELERATING ECONOMY, ELEVATED RISKS INCLUDING THE GLOBAL ECONOMIC OUTLOOK, INTERNATIONAL TRADE AND U.S. INFLATION OUTLOOK"
Matthew Graham  :  "POLICYMAKERS GENERALLY FAVORED AN APPROACH THAT AVOIDED ANY APPEARANCE OF THE FED BEING ON A PRESET COURSE - MINUTES"
Matthew Graham  :  "SEVERAL POLICYMAKERS FAVORED MAINTAINING THE SAME TARGET RANGE AT JULY MEETING"
Matthew Graham  :  "- MOST POLICYMAKERS VIEWED A 25 BP CUT AS PART OF A RECALIBRATION OF POLICY STANCE, OR MID-CYCLE ADJUSTMENT, IN RESPONSE TO RECENT CHANGES IN ECONOMIC OUTLOOK - MINUTES"
Matthew Graham  :  "A COUPLE FED POLICYMAKERS WOULD HAVE PREFERRED A 50 BP RATE CUT IN JULY RATHER THAN A 25 BP CUT TO ADDRESS LOW INFLATION -MINUTES OF JULY 30-31 MEETING"
Matthew Graham  :  "There's never one perfect answer when it comes to something that would otherwise require accurate predictions about the future, but in general, if you tune into the commentary and the Huddle videos, my hope is that you can build your own workable strategy. If you don't get the huddle in your email, be sure to opt into that in your settings menu. If you do get the huddle and still have this question, then I will berate myself and try harder to be a better teacher"
Mike Cunningham  :  "What do folks think in this market about Float vs Lock ?"

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Aug 21
7:00 MBA Purchase Index w/e 243.8 252.6
7:00 Mortgage Refinance Index w/e 2754.7 2742.9
10:00 Existing home sales (ml)* Jul 5.42 5.39 5.27
14:00 FOMC Minutes *