Interesting observation from Northern Trust...
According to Northern Trust's Ms. Asha Banglore, ``The Fed’s announcement of enhanced purchases of agency debt (total purchases as of 5/6/09 is $71.47 billion) and of mortgage-backed securities (total purchases as of 5/7/09 is $365.8 billion) have resulted in bringing down mortgage rates. The 10-year Treasury note yield and mortgage rates are moving in opposite directions, a new record for the history books." (emphasis added)
The US Federal Reserve had earlier announced plans to buy $300 billion of agency debt and $1.25 trillion of mortgage backed securities, so far such interventions has resulted to the divergence between mortgage rates and treasury yields.
The MAIN concerns will be: if this newfangled divergence signifies an anomaly or a new trend? Or how sustainable will this trend be?
My bet: government interventions have short-term influences, market forces will eventually prevail.
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