FICC Focus
The Economy, the Fed, and the Mortgage Market: Macro Matters
Apr 25, 2024
BI's Erica Adelberg and Will Hoffman discuss MBS market trends, housing market performance, and the implications of continued MBS runoff from the Fed's balance sheet. They delve into structural demand implications, rising housing prices, refinancing trends, and the evaluation of higher mortgage coupons.
21:30
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Quick takeaways
- Inflation above target complicates rate cut expectations, impacting housing and mortgage markets.
- Divergence in mortgage demand between new and existing homes due to affordability and market dynamics.
Deep dives
Overview of Upcoming Data Release and Market Reactions
An important Treasury Department refunding announcement is anticipated, followed by the Federal Reserve Statement and Chair Powell's Post-Meeting Press Conference. With recent GDP reports indicating a mix of robust spending in certain categories and lower government spending, there is concern about the Federal Reserve's balance sheet due to treasury cash holdings. Market interest rates have risen, with the 10-year Treasury yield breaching 4.7%, signaling potential further increases and market pricing suggesting a hold on rates into 2025.
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