MBS off 20 bps early…..again. It was a boring trading session in both Asia and Europe. The latter say a bit of an additional “risk-on” move with EU stocks and bond yields moving higher. The only difference is that US bonds weren’t as willing to follow EU bonds this time around.

Heading into the 9:30am NYSE open, 10yr yields returned to roughly unchanged levels at 3.61+ after being just over 3.64% overnight.

First Move After Fed is Mixed; Results as Expected

• 25bp hike
• no change in 2023 dots
• 2024 dots slightly HIGHER (4.3 vs 4.1)

Bonds are currently slightly stronger than they were before the Fed announcement if you ask treasuries (10yr at 3.522).

Existing Home Sales rose 14.5% in February, according to the National Association of Realtors. This ended a 12 month streak of declines. Most notably, the median home price fell by 0.2% to $363,000. Prices rose in the Midwest and the South, while falling in the Northeast and the West. The number of homes for sale came in at 980,000 which represents about a 2.6 month supply at the current sales pace. This is indicative of a tight market; a balanced market is about 6 months’ worth of sales.

The first time homebuyer accounted for 27% of sales which is a pretty low percentage. First time homebuyers accounted for 26% in 2022, which was a record low.

Traders are now pricing in more interest-rate cuts by the Federal Reserve this year even as the central bank hiked its benchmark by a quarter-point and signaled that it expects more tightening after that.  The swaps market shows a bit more than a one-in-two chance

that officials will add another 25 basis points to their benchmark in May.

Treasury Secretary Janet Yellen said regulators aren’t looking to provide “blanket” deposit insurance to stabilize the US banking system, and that the heads of recently failed American lender should be held accountable.  Her staff is studying ways to temporarily raise the

federal insurance cap above $250,000 without Congressional approval in the event the crisis grows, Bloomberg News reported Monday.

Today promised to be one of the most interesting Fed days in a long time and it did not disappoint.  Despite a 25bp rate hike and an even worse dot plot than last time (Fed sees rates staying a quarter point higher in 2024 than they did before), bonds rallied fairly substantially.  This could have to do with a verbiage change in the statement that signified a potential shift in policy tightening or with Powell’s comments on banking issues acting as de facto tightening that prevents the Fed from needing to hike as much.  Last but not least, by saying banking issues will result in tighter credit conditions, Powell effectively told banks “hey… all your friends are going to be making fewer loans”