Mortgage-backed securities markets sold off big on Monday, causing mortgage rates to jump in the afternoon. Fed intervention might prompt a 2-3 day rally in the mortgage bond markets:
“Yields are enough to attract” some investors, said Andy Cossor, the Hong Kong-based chief market strategist for Asia at DZ Bank AG, Germany’s fourth-largest lender. “We’re seeing some green shoots in the economy but we’re a long way from sounding the ‘All Clear.’”
The Fed plans to buy notes maturing from May 2016 to May 2019 today and is scheduled to purchase Treasuries due May 2011 to April 2012 tomorrow, according to its Web site. Policy makers announced in March plans to purchase as much as $300 billion of Treasuries by October in an effort to cap consumer borrowing costs. Bernanke is scheduled to testify in front of the House Budget Committee today at 10 a.m.
Bernanke's testimony will be folded, spindled, and mutilated by traders today so expect volatility. Yesterday, retail mortgage rates were 5.375% (with 1 point); we could see a significant improvement Thursday or Friday.
