When I recorded this video, it was just after The Fed’s 11 am announcement today. This is one of the most anticipated Fed meetings and even a significant economic data point I’ve seen recently.
Updates From The Fed Announcement
The Fed dropped the Fed Funds Rate by 50 basis points (half a percent). Just a week ago, it was assumed that it would be a drop of 25 basis points. If you have anything tied to the Fed Funds rate (such as a home equity line of credit), then it means that your rate just went down by half a point.
As I’ve said a thousand times, this does not correlate directly to mortgage rates. The mortgage market and treasury markets are set by investors based on what they like and dislike.
How the Market Responded
Here is something that is interesting: The Fed dropped the interest rates. On the chart, you can see the actual mortgage securities numbers. Right now, red is “bad” in this chart… it means that rates are moving up (in the wrong direction). The 10-year treasury yield is up by 1 basis point.
Here’s how it works: They make the announcement at 11 am about what they are going to do with the rates, then they release their prepared notes. Then, at 11:30 there is a press conference for Q&A and this is where a bunch of information comes into play.
I wanted to point out these numbers because it is a great example of The Fed making a change to drop interest rates, but the mortgage-backed securities and treasuries actually made a slight move in the other direction.
We Can’t Predict What Will Happen in the Market
This shows that you never know how the actual market is going to react to The Fed making a move with the Fed Funds Rate. It’s important to note that these numbers could look very different by the end of the day. When the Q&A meeting happens, it’s possible that we might see more movement in these numbers.
For now, this a muted move and the market is not really surprised. They are moving slightly in a worse direction, but it’s not a big deal. The market is pretty smart about pricing this stuff in, and The Fed realizes that they need to be careful to avoid shocking the market with unexpected changes.