The FOMC Statement has been released...

• reaffirms promise to keep rates exceptionally low for an extended period
• benchmark rate to remain in zero to 0.25 pct range
• conditions include low rates of resource use, subdued inflation trends, stable expectations
• says to buy $175 bln of agency debt, less than previously announced $200 bln maximum
• says reduced amount of agency debt purchases reflects limited availability of agency debt
• says economic activity has continued to pick up
• says conditions in financial markets roughly unchanged since last meeting
• household spending appears to be expanding but remains constrained by job losses, tight credit
• businesses still cutting back on investment, staffing but at slower pace
• businesses making progress in bringing inventory stocks into better alignment with sales
• repeats economic activity likely to remain weak for a time, says policy actions helping economy
• vote on policy was unanimous
• repeats resource slack to dampen cost pressures, inflation to remain subdued for some time
• repeats monitoring balance sheet, to make adjustments to credit, liquidity programs as needed
• repeats evaluating timing, overall amounts of securities purchases in light of evolving outlook

As we expected no change to the all important "for an extended period" verbiage. Nonetheless the initial reaction in the rates market is NEGATIVE.

The 10yr TSY note yield rose to 3.564% and is currently sideways at 3.55%. The short side of the curve reacted well, the 2yr note yield is falling FAST, currently at 0.916% after reaching 0.952% before  the auction.

Rate sheet influential MBS coupons have given back a few ticks. The FN 4.0 is now -0-08 at 97-29 and the FN 4.5 is trading -0-07 at 100-20.

Lenders May Reprice for the Worse but we are not panicking...the yield curve is too steep and we expect it to correct which will bring down the 10yr yield and help rate sheet influential MBS prices recover.