How low can they go?

How low can they go?  Rates are doing the Limbo and the bar keeps getting set lower after the Fed meeting yesterday where the Fed remains accommodative to the markets.

The Fed lowered the outlook on rate hikes for 2019 to zero hikes, and 2020 to maybe one hike.  More importantly, the Fed has pulled back on its plan to reduce its holding of treasuries. As a reminder, since October 2017 the Fed has been reducing its balance sheet to the tune of about 500 billion to date. The plan now is to stop reducing the balance sheet and to keep the now 4 trillion balance sheet of treasuries that has propped up our market and provided low rates for the past decade.

One concern with regards mortgage rates, part of this plan moving forward is not to purchase Mortgage Back Securities which help our mortgage rates but treasuries only.  While mortgage rates follow the trendline of long bonds like treasuries, they are not the same thing.  If this is the case, we could see some pressure on rates in September/October this year as the Fed purchases provide the demand that help mortgage rates remain low but its early days still.  For now, enjoy best rates since January 2018.


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