Mortgage bond prices are positive this morning helping to bounce back a bit from the steep selloff yesterday.
Traders will position themselves ahead of the Fed results tomorrow afternoon. Many believe the Fed will announce continued quantitative easing. Quantitative easing is tool used by the Fed to increase the supply of money by increasing the excess reserves of the banking system. The Fed basically creates money out of nothing, crediting it’s own accounts, then uses those funds to purchase financial assets usually including government bonds and mortgage backeds securities from financial institutions.
The rest of the week looks to be interesting. We have a Fed meeting, productivity data, and the employment report all in a single week. This is not your typical week with the significant data and elections all hitting us at once. There is more potential for wild market swings, as was evident this afternoon with the terrible slide in prices pushing rates higher.