Fed Statement Little Changed

With a Fed meeting, Treasury auctions, and major economic data on this week's schedule, investors were watching closely for unfavorable news. In the end, there were no major surprises. Little changed in the Fed statement, auction demand was at average levels, and the economic data was generally close to expectations. The biggest influence on mortgage markets turned out to be turmoil in Greece, which caused investors to seek the relative safety of US bonds, and mortgage rates ended the week a little lower.
The economic troubles of Greece have been in the news frequently in recent weeks. Its ability to recover from significant budget deficits and to pay its debts has been questioned. The European Union (EU) and the International Monetary Fund (IMF) are working on a bailout package for Greece to allow enough time for the country to stabilize. Despite the coming assistance, though, the debt of Greece was further downgraded on Tuesday. In addition, investors grew more concerned that other smaller European countries will reveal similar problems. As a result, investors shifted funds to safer investments, including US Treasuries and mortgage-backed securities (MBS).
Prior to Wednesday's Fed meeting, it had been reported that support was growing among Fed officials to begin sales of mortgage-backed securities (MBS) from the Fed's portfolio. The Fed statement made no reference to MBS sales, however. As expected, the Fed made no change in the fed funds rate. The statement described the economy in slightly more positive terms. Otherwise, it was very similar to the prior statement. The Fed retained the "extended period" language regarding the fed funds rate. In short, nothing in the statement caused investors to alter their outlook for Fed policy. For more information and free mortgage advice, please e-mail Keith Gillow at: keith@frontstreetmtg.com.

Tight Lines,

Keith