Alan's Blog

The mortgage industry just received a nice boost! The Fed is going to buy Mortgage Bonds. The Federal Reserve just announced that it would purchase $600B of Mortgage-Backed Securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae. This brilliant move by the Fed is designed to help increase the availability of credit, while lowering fixed mortgage rates. And this move is already lowering mortgage rates so far today as Mortgage Bonds are up a whopping 128bp and appear destined to retest the price highs of 2008.

In addition to purchasing debt backed by Fannie and Freddie, the Fed will set up a $200B program to support consumer and small-business loans. The Fed looks for the plan to create liquidity in the auto, student and small business loan market.

Taking a backseat this morning was preliminary 3rd Qtr. GDP, which matched expectations of -0.5%. In light of this morning's Fed announcement, this report had no effect on the market.

Consumer Confidence is due out shortly and will likely be a very weak number.

At 1pm ET, the Treasury will auction off $26B of 5 Year Notes. Again in the wake of this morning's news, there may not be much of a reaction to the results.

Mortgage Bonds have powered above the Falling Resistance Trendline, which has kept a lid on pricing for months. And pricing has gotten a lot better.