Prior to the Fed rate announcement at 12:15 PM, there are a couple things influencing rates this morning. The first is a shooting at a GOP baseball practice of all places, where five people, including at least one congressman, were shot. Retail Sales dropped 0.3% last month, compared to the 0.4% gain from the month before. Additionally, the Consumer Price Index declined 0.1%, while it had improved 0.2% the prior month. All of these factors have helped mortgage pricing rally up 44 bps to start the day. The big swing though will come with the Fed decision and subsequent remarks.
The Fed has almost $2 trillion dollars in mortgage holdings. As loans have paid off, they have been reinvesting the proceeds of the sales, to the tune of around $30 billion each month, making the Fed the single largest buyer of mortgages in the world. At the last meeting, they hinted that they were going to start letting some of those assets bleed off. With the Fed not acquiring as many new mortgages, long-term rates will head upward. We’ll wait to see what they say on the topic in their statement three hours from now.