Mortgage investors have returned from their Thanksgiving Holiday break with a bad case of risk indigestion. It appears investors of every description will spend the coming week fretting about whether Friday’s nonfarm payroll will be strong enough to induce the Fed to begin paring its $85 billion-a-month bond buying program. Some think a strong November payroll report will provide the Fed with justification to begin weaning credit markets off of their intravenous fix of buying demand from Uncle Sam by the end of the month – and others think the Fed will slowly begin turning off the tap in January. In any case the Fed will to begin loosening the tethers holding mortgage rates near historical lows well before the new year draws to a close– and when they do – mortgage investors will have largely already priced in the event. Shortly after the first reduction in the Fed’s QE3 fiscal stimulus is announced – it wouldn’t be surprising to actually see mortgage interest rates creep back toward lower levels. As it stands now, the Fed could cut their monthly purchases of mortgage-backed securities by roughly half – and still have enough funding to buy all newly minted agency eligible mortgage-backed securities our industry can generate. As usual, mortgage investors are aggressively playing defense and pricing in an outcome far worse than it will actually be. For the time being there is nothing to do but stand aside until the knee-knocking and hand-wringing subsides and calmer, cooler heads once again take control
Posted on: Mon, 02 Dec 2013 18:02:40 +0000
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