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Fed Plans To Unwind Treasury and Mortgage Positions

[fa icon="calendar'] Apr 11, 2017 5:16:37 PM / by Eustis Mortgage posted in mortgage news, federal reserve

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As a method of normalizing monetary policy, the Federal Reserve is planning a gradual liquidation of its massive portfolio of US Treasury and Mortgage Backed Securities (MBS). The rationale is that employment gains have been steady and averaging over 200,000 jobs per month. The core inflation rate (ex the volatile food and energy components) has also been hovering near 2%, which is the Fed’s inflation target. Putting more fixed income assets like Treasuries and MBS back into the market is one way of raising interest rates. If there is more supply on the market, all other things being equal, the price should go down. If the price of a fixed income asset goes down, the yield or rate goes up.

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