Interest Rates and the Fed…..
by Tom on June 6, 2009
in Market Musings, Mortgage Rate Updates
There are a couple of things that really concern me about this article…..
- The Fed Funds market has priced in a 48% chance that prime rate will go up by .25% in September. That’s a dramatic switch from even two days ago and really illustrates what a dramatic upheaval the bond and interest rate markets are undergoing.
- When you get a member of the Federal Reserve standing up and saying, “you know, we didn’t really know what would happen when we started buying Mortgage Backed Securities to try to keep the market going.”
Well, guess what, we’re finding out the longer term effects of it right now, and they aren’t pretty.
Tom Vanderwell
Treasuries/Fed policy/Uh oh | The Big Picture
……The fed funds futures are pricing in a 48% chance of a 25 bps rate hike by the Sept meeting and that is up from a 2% chance priced in just yesterday……
…..Using quotes from DJ, she said that while buying MBS and US treasuries got off to a good start with yields heading lower, “there’s a lot that central bankers don’t know about the magnitude and duration of the effects of these policies” and “our standard monetary policy models do not incorporate financial frictions that lead to asset purchases having real effects.”…….
