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Must-know: Why Bonds sold off on the FOMC minutes



Why follow the weekly Realist Real Estate Roundup?

The roundup is a weekly series in which we discuss the week’s trading in government bonds and TBA (To-Be-Announced) mortgage-backed securities. We’ll see where mortgage rates have been and we’ll go over the weekly economic data and earnings announcements. Then we’ll look forward to what’s coming up the following week. The information in this series will be relevant to mortgage REITs like American Capital Agency (AGNC), Annaly (NLY), Hatteras (HTS), Capstead (CMO), and MFA Financial (MFA) as well as people who invest in homebuilders.

Bonds sell off on the October FOMC minutes

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Last week was relatively data-light, with no market-moving reports. The highlight of the week was the FOMC minutes from the October meeting. Despite the government shutdown, the Fed was still relatively sanguine about the state of the economy and poured cold water on the notion that the Fed’s decision to stand pat in September meant tapering was on an indefinite hold. Bonds and MBS sold off on the minutes.

Mel Watt re-enters the picture

Another significant event happened last week, when Senate Majority Leader Harry Reid “went nuclear” and changed the rules about filibustering presidential nominees for the courts and agencies. Now, all nominations can pass the Senate with a majority vote, thus ending the minority party’s ability to filibuster nominees. This means Mel Watt will probably get confirmed on a party line vote—and that could mean big things for mortgage REITs and mortgage originators.

In the next parts of this series, we’ll look at trading in the TBA market (which is the basis for mortgage rates), see where mortgage rates have been for the week, and then discuss past and upcoming economic data.


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