This afternoon's release of the Minutes from the most recent FOMC meeting make sense. They're filled with exactly the sort of stuff markets expected to see in late January when the statement came out. The only issue was that the statement itself was read by markets as being surprisingly hawkish (i.e. less accommodative policy implications). Here are a few of the most important wires that hit with the report:
RTRS - MANY FED POLICYMAKERS LEANING TOWARD KEEPING INTEREST RATES LOWER FOR LONGER, GIVEN WEAK INFLATION AND OTHER RISKS
RTRS- FED POLICYMAKERS WANT MORE EVIDENCE OF CONTINUED GROWTH, SIGNS THAT INFLATION WILL RISE TO TARGET BEFORE COMMENCING RATE HIKES
RTRS- MANY FED POLICYMAKERS CONCERNED THAT DROPPING THE WORD "PATIENT" FROM INTEREST RATE GUIDANCE NOW RISKS TYING MARKET EXPECTATIONS TO A NARROW RANGE OF DATES FOR RATE LIFT-OFF
RTRS- FED MEMBERS VIEWED DROP IN INFLATION WITH CONCERN, CITED NEED TO KEEP A CLOSE WATCH ON MEASURES OF INFLATION EXPECTATIONS
Long story short, the minutes give a much clearer signal on rate-hike timing than we've seen elsewhere, and that includes the statement itself. The caveats are twofold. First, market participants will wait until next week to draw firmer conclusions, when Yellen gives semi-annual congressional testimony. Second, the most recent jobs report came in after the Fed meeting, and some would argue that the pick-up in wage growth--not to mention the boom in payroll creation--might go some way to draw out a more hawkish Fed assessment of monetary policy needs.
Even so, today's reaction has been almost exclusively positive. Such a response validates the notion that part of yesterday's weakness was a hedge against more hawkish Fed today. The dovish minutes relieve some pressure. While bonds can't be considered to be out of woods yet, this at least suggests they aren't fully suicidal.
Most lenders have repriced positively--some more than twice. For what it's worth, MBS Live members were actively discussing lock/float strategy leading up to the meeting, and the consensus was to wait for the initial reaction while remaining ready to lock. In addition to the real-time moves hitting the screen at 2:00:01pm, members also received a written alert with the relevant headlines by 2:03pm. To find out more about becoming a member, click here, or simply click here to begin an extended 4 week risk-free trial.