Markets are lower this morning after the Fed maintained interest rates yesterday. Bonds and MBS are up small.
Surprising that bonds aren’t rallying harder this morning as European rates are moving aggressively lower, with the German Bund yield down 8 basis points to 24 bp. The dollar is getting hit a bit, which might explain the lack of follow-through.
The Fed maintained interest rates and put out a relatively dovish statement. They took down their forecast for interest rates going out through 2018, which helped put a bid under bonds. In their updated economic forecasts, they took down their forecast for 2016 GDP to 2.2% from 2.4% and their estimate of 2016 inflation to 1.4% from 1.6%. They maintained their forecast for 4.7% unemployment. On the dot graph, the forecast looks for 2 more rate hikes this year, as opposed to their forecast of 4 in December.
After the FOMC statement, stocks and bonds rallied, with the 10 year yield dropping about 4 basis points and the 2 year yield dropping 11.
Initial Jobless Claims rose to 265k last week, while the Philly Fed Index improved.
The Bloomberg Consumer Comfort Index edged up last week to 44.3 from 43.8.
The Index of Leading Economic Indicators improved 0.1% in February, while job openings increased to 5.54 million.
CFPB Chairman Richard Cordray appeared before the House Financial Services Committee this morning. He said the CFPB will take a “sensitive” approach to TRID enforcement, meaning that if you are making a good-faith effort to comply, they won’t hammer you.