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$bn, source: St Louis Fed |
More importantly, bank reserves are basically holding flat...
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Reserve balances with Federal Reserve Banks (source FRB) |
... and so is the overall monetary base (effectively no new base money has been created since the start of the QE3 program).
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$bn, source: St Louis Fed |
Just the "threat" of open-ended MBS purchases by the Fed has created demand for agency MBS, pushing MBS yields to new lows. That in return has sent mortgage rates to record lows as well.
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Source: Bankrate |
In fact today even as the 30y fixed rate hovers above absolute lows, the 15y fixed and the 30y jumbo both hit records.
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Source: MortgageNewsDaily.com |
If lowering mortgage rates was what the Fed intended to accomplish with the latest monetary expansion, the central bank has succeeded. And so far they have done it without a significant change in bank reserves. Whether this will translate into improved economic activity and job growth remains to be seen.
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