Fed Will Not Extend Mortgage Backed Securities Purchases February 1, 2010

On the economic front, the Fed did confirm it will not extend the purchase of Mortgage Backed Securities (MBS) slated to end March 31st. This announcement did cause rates to rise slightly. Investors are mixed on what affect this will have on interest rates.

Currently the Fed buys 75% of all MBS issued on the street. Some investors say that everyone has known that the Fed program will end in March and therefore this is already priced into MBS prices. While others state that rates must go higher when the buyer of 75% of all the MBS issues goes away; they expect rates to rise as much as 1%. I am in this camp as I cannot see prices changing (prices lower, yield higher) until we get closer to the end. Only time will tell.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

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