Mortgage Market Could Get Its Mojo Back as Powell Pivots

It was a bombshell down in Washington D.C. today. The U.S. Federal Reserve has just signalled that liquidity will return to the mortgage market in 2024.

In a policy swivel that few saw coming, Fed chief Jerome Powell confirmed the Fed has already begun discussing when to "dial back" rate hikes—not that they will in the near future. To markets, that's the Fed effectively endorsing the peak rate thesis.

Canadian yields, moving in sympathy with Treasuries, plunged faster than Charlie Sheen's career after Two and a Half Men. The 5-year #GoC# is down 21 bps as we speak. We're hitting lows we haven't seen in half a year. On a point basis, today is the most significant drop since the March madness with U.S. banks.

The New Crystal Ball: Rates Edition

Fed headliner Powell took to the stage in his presser and talked about "real progress in core inflation." As a result, #FOMC# members now see 75 bps in cuts in 2024 and more easing in 2025.

In Canada, market expectations are approaching five (5) rate cuts in 2024 (no joke), with the first in April. Here's the latest expected BoC rate path, as implied by Canada's #OIS# market.