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Fed Injects $200 Billion, Bonds Down

Bonds were down, retail rates were unchanged this afternoon after stock markets posted strong gains today on a surprise Fed announcement.

January’s Goods and Services Trade Balance was released today showing weaker than expected results, but was upstaged by the Fed move.

The surprise Fed injection of $200 billion is what moved markets today. What is significant about this injection is that banks can use AAA mortgage securities as collateral for borrowing money from the government. In the past, they needed to use Freddie or Fannie securities only. This should increase the banks’ ability to leverage their mortgage assets in order to make more loans available to borrowers.

Looking forward to Thursday, the February Retail Sales report will give us important signs of the health of the economy at the level of consumer spending. It could move rates in either direction, if it shows strength or weakness in this sector.

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