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Bond Market Update

Market Update

Thursday, September 21, 2017

What's going on and why does it matter?

Mortgage bonds seem to be resilient in the wake of the Fed's announcement yesterday that they will indeed begin the "Great Unwinding" of their massive $4.5 trillion of bond holdings starting next month. In accordance with their previous guidance, the Fed announced that starting in October, they'll reduce their bond purchases by $10 billion per month (a $6 billion reduction in Treasury purchases and a $4 billion reduction in mortgage bond purchases). In order for interest rates to stay where they are, private investors will need to "fill the Fed's shoes" so to speak and absorb the supply of bonds that were previously being purchased by the Fed. The market has been expecting this for some time now, hence the somewhat muted reaction. As for today, the Fed is scheduled to purchase up to $1.825 billion of GNMA and 15-year conventional mortgage bonds.

What should you do about it?
Watch for mortgage bonds to rebound higher off their 100-day moving average, but lock your rate quickly if bonds break below that critical level of support.

Economic Calendar

Economic reports that may impact mortgage rates this week:

Date Report Period Prior Est. Actual
19 Sep
Aug 1.23M 1.22M 1.30M
19 Sep
Aug 1.19M 1.175M 1.18M
20 Sep
Home Sales
Aug 5.44M 5.46M 5.35M
20 Sep
Fed Funds
Target Rate
- 1.25% 1.25% 1.25%
21 Sep
Initial Jobless
Week of
Sep 11
284k 300k 259k

Matt Chao

Matt Chao
NMLS Number: 1428557
VIP Independend Mortgage, Inc.
Corporate NMLS Number: 145502
(858) 216-2368
3919 30th St, Suite 7
San Diego, California 92104