Bond Markets Improve Following FOMC Minutes
As expected, there is generally no new information in the FOMC Minutes beyond what has already been gleaned from the Announcement and speeches. Given that the day of the announcement marked a sell-off for bond markets, it stood to reason that any attempt to balance the perceptions from that day would be positive for bond markets, and that's what we're seeing in the Minutes.
Of particular note are the following snippets:
"Most participants also believed that, as part of the process of
clarifying the Committee's future policy intentions, it would be
appropriate at this time for the Committee to provide additional
guidance in its postmeeting statement regarding the likely behavior of
the federal funds rate after its first increase." (clarity is good for markets)
" A number of participants noted the overall upward shift since December
in participants' projections of the federal funds rate included in the
March SEP, with some expressing concern that this component of the SEP
could be misconstrued as indicating a move by the Committee to a less
accommodative reaction function."
In other words, the Fed is saying "that thing you guys thought justified a move higher in rates isn't exactly the best glimpse at our intentions. As such, we'll not only tell you that, but also tell you we plan to communicate that better next time."
Bond markets like it, but not enough to get back to yesterday's best levels. MBS are back to unchanged on the day and about an eighth of a point higher than morning rate-sheet print times. If we're able to hold here or improve, some aggressive lenders might consider positive reprices. Holding or improving is still up in the air. Momentum has been sideways since the first initial pop into stronger territory.