In a small vacuum, today's Fed announcement had a noticeably positive impact on bonds despite yielding "just another day" vibes in the bigger picture. Traders reacted to some combination of a reasonably steady dot plot and the announcement of slower balance sheet shrinkage (which, in turn, implies more bond buying in the short term at the expense of a longer wait before the Fed fully reinvests its balance sheet proceeds). If you don't understand that last part, don't worry. It's arcane. It is basically a technical adjustment in the pace, but not in the destination. The bottom line is that the adjustment was mildly friendly for bonds today, even if it was a technical adjustment and not an indication of easier monetary policy.
Roughly unchanged overnight and slightly weaker in the past hour. MBS down an eighth and 10yr up 1.6bps at 4.302
01:00 PM
Sideways since the last update. MBS down 3 ticks on the day and 10yr up 2.4bps at 4.311
02:25 PM
Stronger after Fed announcement (greatly slowing the pace of Treasury tightening). MBS up 2 ticks (.06) and 10yr down 1.3bps at 4.274
03:41 PM
Holding gains after Powell press conference. MBS up 5 ticks (.16) and 10yr down 3.4bps at 4.253
Lock / Float Considerations
Bonds/rates have generally been in consolidation mode after hitting the best levels in early March. That's been mostly a sideways affair, but a breakout in either direction is possible. While there was a risk of a breakout associated with the Fed announcement, (and while rates technically broke out to the downside), it's easier to make a case that the consolidation pattern now merely shifts to a trading range (less of a triangle and more like a rectangle). This has limited relevance for locking/floating, but it does give the risk-tolerant crowd some more room to maneuver before hitting stop-loss ceilings. The risk-averse crowd is happy to lock the lowest rates in over a week and nearly the lowest rates in several months.
