Good Friday AM on this third consecutive version of “a week in bonds I would like to forget”.
Long story short, after the Fed has sat idly by watching rates move higher and saying nothing, they did come out with a brief statement today. A year ago the Fed was accommodative and allowed banks/financial institutions to hold onto safe assets (Treasury bonds, note, bills) without requiring the 5% capital retention it imposes for all other assets. That waiver is expiring at the end of March. Market concerns were that if the Fed does not extend the waiver, banks will have to sell their Treasury holdings and with limited buyers for those Treasuries, rates would jump yet again. Markets have been crossing fingers and toes hoping the Fed would throw at least this bone to protect rates from spiraling further north. This morning, the Fed did release its statement and has decided to not extend its waiver. Well that is a gut punch. Overnight (before this announcement) Treasuries were making a small rebound.. or at least attempting to. The hope was that the 10yr and mortgage rates would be able to start their climb higher in price and lower in yield. This morning’s Fed release squashed that. The silver lining here is that the market has adjusted up so quickly, today’s news has not had any impact (so far) on rates. That is really a gift as I would have expected rates to move up. Stocks did not like the news and have either pared gains or gone negative. While I do expect rates to improve, I do not see any benefit floating right now. Stay locked.
Please remain safe and healthy, enjoy the weekend and first, make today great.