Yesterday, Kristina Peterson of the Dow Jones Newswires reported that the Federal Reserve will cease all purchases of home-loan-backed securities- the likes of which it purchases in bulk from government controlled Ginnie Me, Fannie Mae, and Freddie Mac – next month, as previously announced.
While this decision could lead to an increases in mortgage rates, markets are anticipating the Fed’s move and, as a result, there may be no dramatic bump in rates at the end of March.
Edgemoor Managing Director Jordan Smyth was a source for the article:
…latest Fed statements show no wavering on the program’s Mar. 31 expiration date and the market is now beginning to anticipate its end.
“It shouldn’t be a surprise to anybody,” said Jordan Smyth, managing director of Edgemoor Investment Advisors in the Washington area. The central bank has made it a point to communicate clearly to the market what to expect and then deliver on that promise, he said, “rather than have people think if things don’t work out perfectly, there’s another bailout coming.”
As the Fed continues to scale back efforts such as these – pulling back the throttle of government-induced economic stimulus – it will be very interesting to note the changes to the economic landscape. So far, Chairman Bernanke has been appropriately measured in his approach, and we’ll keep a close eye an any future developments as they arise.
