Could a Fed rate hike actually lead to lower mortgage rates?
To at least one veteran bond trader, the fundamentals of that market theory appear alive and well in the current market today. The analyst behind this call is not an economist. He is a market technician who has spent decades reading charts rather than economic reports.
Billy Abrams (pictured top), who spent decades in institutional fixed income before moving into correspondent business development at AD Mortgage and taking the role of president and CEO of IF Securities, said what comes next, if the pattern holds, is a rally in Treasuries that could bring meaningful relief to mortgage rates before yields eventually resume a longer-term climb.
While the markets may be betting on the Fed to hold steady until December, Abrams said a surprise move by the Fed in September could be the catalyst the bond market needs.
“I personally think that if the Fed were to shock everybody and raise rates, I think the bond market would firm up,” Abrams told Mortgage Professional America. “A more aggressive Fed claiming they’re going to fight inflation would actually help the long end of the bond market.”
Where the market may move
Abrams is a market technician, meaning he bases his calls on chart patterns rather than economic fundamentals. Right now, the pattern he sees plays out in three stages.
