U.S. stock-index futures fell sharply Sunday night following the Federal Reserve’s emergency decision to slash interest rates nearly to zero and buy $700 billion in Treasurys and mortgage-backed securities in an effort to quell financial market turmoil sparked by the global coronavirus pandemic.
The benchmark federal fund rate is now at a range of 0 to 0.25 percent, down from a range of 1 to 1.25 percent. The cut essentially brings the nation’s interest rate to zero — something that President Trump has repeatedly pressed for over the past year.
“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Fed said in its Sunday evening statement.
The Fed also said that it will buy at least $500 billion in Treasury securities and $200 billion in mortgage-backed securities over the coming months, a program known as “quantitative easing.”
This may or may not be good for mortgage rates. Contrary to popular belief, historically Fed Rate Curts result in Mortgage rates rising.
Weather ot not the Fed buying $500 billion in Treasury Securities and $200 billion in Mortgage Backed Securities brings Mortgage Rates lower is to be seen. There are many other factors that are in play, such as convesity buying, oil and heavy institutional borrowing on banks.
Stay tuned for another wild ride in the markets.
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Source: John Sauro President North Atlantic Mortgage Corp. & Fox News