More grist for the QE3 mill. Sounds like it will be sooner rather than later.
How long have you been saying “QE to Infinity”?
CIGA Black Swan
Mortgage-Bond Market Roiled as Bernanke Report Fuels Speculation
By Jody Shenn – Jan 5, 2012 4:32 PM ET
Fannie Mae and Freddie Mac mortgage bonds that guide home-loan rates gained while those backed by high-cost debt declined on speculation the U.S. government may boost efforts to aid the housing market.
Yields on Fannie Mae’s current-coupon 30-year fixed-rate mortgage (MTGEFNCL) securities, or those trading closest to face value, declined about 4 basis points to 84 basis points more than 10- year U.S. government debt as of 3:30 p.m. in New York, the tightest spread since May 19, according to data compiled by Bloomberg. The company’s 6.5 percent securities, whose underlying loan rates average about 7 percent, fell almost 0.2 cent on the dollar to about 111 cents, Bloomberg data show.
The current-coupon bonds, which guide loan rates, extended this month’s gains relative to Treasuries after a report from Federal Reserve Chairman Ben S. Bernanke yesterday called the weakness in the housing market a “significant barrier” to U.S. economic health.
“The white paper increases the probability of QE3 centered on MBS as the paper emphasizes that housing is still a key problem with no easy solution,” Morgan Stanley analysts Vipul Jain, Janaki Rao and Zofia Koscielniak wrote today in a note to clients, referring to what would be the Fed’s third round of bond buying called quantitative easing.