A very brief summary of the FOMC statement is: No change in rates, very little change in verbiage. Treasuries are selling off a bit pushing yields slightly higher.
One bit of verbiage that will likely see get some headline status is that the Fed has lowered its Agency purchase amount from $200 Billion down to $175 Billion. This is based solely on availability. The GSE’s have reduced funding needs and are therefore issuing fewer bonds…this means there are fewer bonds available to purchase. An example of this reduced issuance was that last Friday FNMA closed their desk mid-morning…a very unusual event but one that points to the fact that they aren’t in the market as much as they were when the housing market was booming.
The Treasury curve is steepening at the moment. The 30 year is off over a point, the 10 year about a half, and the short end is virtually unchanged. As I type the market is rallying back a bit. It looks to be one of those days where some news comes out that causes a nice pullback in prices…but half an hour later prices begin creeping back up. Many times in the last month the “creep” has undone most of the sell off by days-end.
The full statement is attached. If you have any questions, or if there is anything I can be doing for you just let me know.
Steve Scaramastro
800-311-0707
| Vining Sparks Portfolio Management Group | | |
| ____________________________________________________________________________ News The next Fed meeting is scheduled for Dec. 16, 2009. ____________________________________________________________________________ Release Date: November 4, 2009 For immediate release Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time. In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen. ____________________________________________________________________________ Historical Yield Curve Video and Overview at Fidelity.com
Composite Bond Rates | Bloomberg Bond Rates ____________________________________________________________________________ | ||
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