Source: WallStreetGreek blog
This rate cut was unusual. Normally, when the Fed cuts the Fed Funds Rate, it favors stocks and money flows out of the bond market. Therefore, mortgage rates suffer.
This time around, Bernanke threw us a bone – he indicated that the Fed would continue to purchase Mortgage Backed Securities (MBS), those bonds that determine mortgage rates. With that, rates have gotten better, instead of worse.
They are still extremely volatile; but they are lower today than before the Fed rate cut. So, Bernanke put on his Santa suit for this Fed rate cut.
Related posts:
