03/16/2020
Hi all... lots of chatter about Fed Funds rate and their relationship to Mortgage Rates. As you can see by this chart, for the last 3 years, the spread between the two has been 1-2%. There were brief periods where we saw as little as a half point and other periods when we saw over 3%. If I had to guess, given the extreme circumstances that have brought the Fed to zero, we will most likely see a 2 1/2% spread and it could be at three for a while. The reason I think the spread could be larger is that investors may perceive risk in the MBS, given the potential of a recession. On the other hand, MBS will soon be the safest game in town if an investor wants yield. Feel free to reach out if you would like to discuss further
