Posted on 06/19/2013 3:14:37 PM PDT by whitedog57
Fed Chair Ben Bernanke held a Q&A after the Fed’s announcement of … no changes in monetary policy. But they might in future meetings. That was predicted by virtually everyone.
But the surprise was in the Q&A session.
QUESTION: Mr. Chairman, you’ve always argued that it’s the stock of assets that the Federal Reserve holds which affects long-term interest rates. How do you reconcile that with the very sharp rise in real interest rates that we’ve seen in recent weeks? And do you think the market is correctly interpreting what you think is most likely to be the future path of the Federal Reserve’s stock of assets? Thank you.
BERNANKE: Well, we — we were a little puzzled by that. It was — it was bigger than can be explained, I think, by changes in the ultimate stock of asset purchases within reasonable ranges, so I think we have to conclude that there are other factors at work, as well, including, again, some optimism about the economy, maybe some uncertainty arising. So I’m agreeing with you that — that it seems larger than can be explained by a changing view of monetary policy.
Expectations of economic growth are sending rates higher? Or lack of confidence in Central Banks? Whatever the reason, Treasury yields on the 10 year rose 16.7 basis points today, mostly after the announcement. Rates have been rising since May 2nd.
The US yield curve rose mostly in the mid to long end since May 2nd.
Mortgage rates (Mortgage Bankers 30 year effective rate and Freddie Mac’s Committment rate) have risen since May 2nd as well.
And Fannie Mae 3.0 coupon MBS duration continues to rise.
The Dow dropped over 200 points on Bernanke’s veiled implication that The Fed may taper over the next year.
And precious metals like gold, silver and platinum fell too.
Wow. Bad day for The Fed when hinting of a pull back drives interest rates up and stocks down.
for a bunch of people who are suppose to be “the best and the brightest” they sure are surprised a lot.
Unexpected...?
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