Fixed Income Recap

Treasuries
The market has certainly calmed down since the Fed’s announcement Wednesday afternoon. Thursday’s trading was relatively calm and rates rose a bit as traders took profits from the mid-week fury.

Spring is officially here, so desks will be a little short handed as spring break runs its course. The two-year finished the day unchanged, and the ten-year was lower by 13/32 today on very light trading. The benchmark curve steepened by 3 basis points on the day, but still stands 19 basis points flatter for the week. A basis point represents .01%.

MBS
MBS has stayed even with Treasuries since the Fed announcement, but activity has picked up in the mortgage refinance area on speculation that thirty-year fixed mortgage rates are heading to 4.5%. The main hindrance to rates going right to 4.5% in a hurry is that mortgage shops aren’t staffed to handle the demand. When they get too busy to keep up, banks choose not to be as competitive on rates and they stay a little higher. There is nothing stopping rates from going lower, but it may be more of a steady downward trend than some would expect.

TIPS
Treasury Inflation Protected Securities had great week as a result of the FOMC announcement. The benchmark ten-year was up 4% for the week on anticipation of Fed purchases and future inflation resulting from our central banks very easy money policy. The TIPS ETF (TIP) was up 3.44% for the week. Here is someone’s take on the state of our monetary regulator and what it may mean for the future.

Have a great evening.

Cliff J. Reynolds Jr.
Junior Analyst