Who Will Replace The Fed's Mortgage Purchases

May 12, 2022 2:24 PM ETTLT, TLH, PLW, EDV, SPTL, ZROZ, VGLT, LGOV, SCHQ, TFJL, TBJL, GOVZ, TBT, TMV, IEF, SHY, TBF, TMF, PST, TTT, IEI, BIL, TYO, UBT, UST, VGSH, SHV, VGIT, GOVT, SCHO, TBX, SCHR, GSY, TYD, DTYL, EGF, VUSTX, DTUS, DTUL, DFVL, TAPR, DFVS, FIBR, GBIL5 Comments

Summary

  • With the Fed stopping QE, stopping the purchase of new bonds and before long will begin letting maturing bonds run off.
  • The expectation is that the Fed will raise rates, which will have a knock on effect in just about all rate products including mortgages.
  • The underlying fundamentals of the housing market appear to be super strong.

Real Estate Agent Working On Laptop

xijian/E+ via Getty Images

Originally published on February 22, 2022

I came across this fascinating read about #cryptoinvesting by Dan Morehead who showed (See Chart 1) that Treasury and Mortgage bonds were overvalued by some $15 Trillion.

Chart 1

Treasury + Mortgage Bonds Overvaluation

Mortgage rates

Housing Prices Case Shiller National Home Price Index

Inventory as percent of housing stocks

2004 - 2007 Vintage non-agency residential mortgage characteristics

mortgage originations by credit score

This article was written by

Dani is a CFA (Chartered Financial Analyst) holder, and has received his Portfolio Manager's license from the Israeli Securities Authority (ISA). He works for Goldrock Capital, a multi-family office that advises significant families in the management of their affairs and financial assets.

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