This week in 1973 Billie Jean King defeated former number 1 ranked Bobby Riggs in a tennis match which was publicized as the “Battle of the Sexes”. Over 50 million television viewers watched the event. The prior year King was the first woman to be named “Sportsperson of the Year” by Sports Illustrated.
This week the first woman to chair the Federal Reserve will deliver a very important speech following a regularly scheduled monetary policy meeting. As I’ve written many times the Fed is about to embark on an unwinding of the monetary stimulus they injected into the economy in the wake of the financial crisis.
The Fed is currently in uncharted territory and analysts disagree over the impact of such a move. Mechanically the Fed will simply allow bonds on their balance sheet to mature without replacing them.
Even without expanding their balance sheet the Fed has remained the highest volume buyer since quantitative easing ended. The concern is that when the Fed withdraws their level of demand from the market interest rates will have to increase in order to attract buyers. The degree by which interest rates rise is a matter of debate.
What all parties do agree on is that mortgage rates are very unlikely to improve from these levels as a result of this development.
We shifted to a locking bias two weeks ago and that move has paid off. I will remain in a locking stance.
Current Outlook: locking