Bond markets rallied rather impressively today following the FOMC Announcement.  Actually, it was really the Fed's economic projections (aka, the "dots") more than anything, that conveyed the Fed's dovish tone.  

In other words, the announcement itself wasn't especially enlightening.  In fact, it could have been taken to be on the hawkish side in parts (i.e. pointing toward policy tightening).  For instance, there were several small verbiage changes that upgraded the Fed's assessment of the labor market, downgraded global growth concerns, and acknowledged some progress in inflation numbers.

The caveat here is that an increased focus on inflation could be taken dovishly (i.e. in favor of easier monetary policy) because financial markets don't have a lot of belief or fear about strong inflation any time soon.  In other words, if the Fed is now focused mostly on inflation, they could be waiting even longer to raise rates and be doing it even slower.

All of this focus on the text of the announcement may be at moot point, however.  Instead, markets seemed more intently focused on the dots--the Fed members' economic projections which include the estimated Fed Funds Rate at the end of the year.  Market participants knew that the dots would show lower rates, but the confirmation was obviously worth something.  Whereas the average Fed member saw the Fed Funds rate at 1.375 at the end of 2016 in the December meeting, they now see it at .875.  This implies 2 hikes in 2016 versus 4 hikes previously.

2016-3-16 dots

The biggest winners were the shorter maturity Treasury notes, while 10yr yields and MBS only experienced a mild rally in comparison.  To emphasize the point, 3yr yields fell 11.7bps while 30yr yields only moved 1.8bps lower.   It was a good day for MBS nonetheless, with Fannie 3.0s ending roughly half a point higher than yesterday.


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
101-26 : +0-12
Treasuries
10 YR
1.9130 : -0.0460
Pricing as of 3/16/16 5:06PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:38PM  :  Some Thoughts on FOMC Changes (Hint: INFLATION!)
2:05PM  :  First Move is Positive After FOMC Announcement
8:41AM  :  ALERT ISSUED: First Move is Weaker Following Stronger Econ Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Andy Pada, Jr.  :  "2 rate hikes instead of 4 seemed to be consensus going into this meeting"
Victor Burek  :  "so from 4 to 2 hikes"
Matthew Graham  :  "RTRS- MEDIAN VIEW OF APPROPRIATE FEDERAL FUNDS RATE AT END-2016 IS 0.875 PCT (PREV 1.375 PCT), END-2017 IS 1.875 PCT (PREV 2.375 PCT); END-2018 3.000 (PREV 3.250 PCT): LONGER-RUN IS 3.250 PCT (PREV 3.50 PCT) - FED PROJECTIONS"
Matthew Graham  :  "RTRS - FED REPEATS EXPECTS ECONOMIC CONDITIONS WILL EVOLVE IN WAY THAT WARRANTS "ONLY GRADUAL INCREASES" IN FED FUNDS RATE"
Matthew Graham  :  "RTRS - FED SAYS RECENT INDICATORS POINT TO ADDITIONAL STRENGTHENING OF LABOR MARKET, BUT BUSINESS FIXED INVESTMENT AND EXPORTS SOFT"
Matthew Graham  :  "RTRS- FED SAYS CONTINUES TO MONITOR INFLATION CLOSELY; REPEATS STILL SEES INFLATION RISING TO 2 PCT TARGET OVER MEDIUM TERM AS TRANSITORY EFFECTS FADE"
Matthew Graham  :  "RTRS - FED SAYS GLOBAL ECONOMIC AND FINANCIAL DEVELOPMENTS CONTINUE TO POSE RISKS; DOES NOT ASSESS BALANCE OF RISKS IN STATEMENT"
Matthew Graham  :  "RTRS - FED LEAVES TARGET INTEREST RATE UNCHANGED AT 0.25-0.50 PCT, POLICYMAKERS SEE TWO RATE HIKES IN 2016"
Dominick Cordone  :  "$0 is now acceptable"
Joey Hansen  :  "I'm a regular lurker and just wanted to say that it is awesome to be able to click a link from this site and watch the press conference live. Thanks for creating such a great site!"