Update 12:30 p.m.
ET: The Federal Open
Market Committee announced the continuation of their monthly purchases of $40
billion worth of mortgage-backed securities and the launch of a new program to
buy an additional $45 billion per month worth of longer-date Treasury
obligations. According to the Fed these purchase programs -- together
with the their existing record-low benchmark short-term interest rates -- will
remain firmly in place until the national jobless rate falls from its current
7.7% level to 6.5%.
The combined
programs are intended to put a ceiling over longer-term interest rates -
greasing the skids for an economic recovery in 2013 and beyond. The new
Treasury purchase program will require the Fed to turn on their money printing
presses as they expand their balance sheet which is unsettling to some
longer-term fixed income investors because of the longer-term inflation threats
associated with the Fed's new stimulus buying programs.
Overall, today's
announcement is probably mortgage interest rate neutral in the short-term (next
10 to 15 days). When viewed from a longer-term perspective -- the
mechanics of the Fed's new Treasury program will likely be broadly considered
to be a bit more threatening to the prospects for steady to perhaps
fractionally lower mortgage interest rates.
