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Stymied: Mortgage Rates Rise Despite Accelerating Fed Agency MBS Purchases
Confounded Interest ^ | 02/222013 | Anthony B. Sanders

Posted on 02/22/2013 6:05:36 AM PST by whitedog57

I am going on Fox Business with Adam Shapiro at 2:45pm EST today to discuss the housing recovery and whether it is sustainable. While mulling over the data, I noticed a disturbing trend. Mortgage rates for consumers are rising with additional Fed asset purchases.

We are all aware of The Fed’s massive intervention in the economy through its quantitative easing programs beginning in September 2008.

But what is lost on that chart is the dramatic growth in Treasury and agency mortgage-backed securities (MBS) since the beginning of October 2012.

Agency MBS, in particular, has risen dramatically.

But has the massive intervention by The Fed in the form of QE3 ($85 billion in Treasury and Agency MBS purchases per month) helped push mortgage rates (yellow line) down further? The answer is no. Mortgage rates are actually rising with additional agency MBS purchases.

Markets were spooked when minutes from the US Federal Reserve’s January meeting released on Wednesday showed its officials are divided over how long to continue QE3, as its third round of quantitative easing is known.

Now you can understand why some officials are circumspect about continuing QE3.

Saving grace: at least the duration on recent agency MBS purchases is relatively low.

TOPICS: Business/Economy; Government; Politics
KEYWORDS: duration; fed; housing; mortgage
Way to go Bernanke!
1 posted on 02/22/2013 6:05:50 AM PST by whitedog57
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To: whitedog57

eventually, when dropped, over time, dead cats cease to bounce

2 posted on 02/22/2013 6:24:20 AM PST by silverleaf (Age Takes a Toll: Please Have Exact Change)
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