Morning Report: Markets rally on the Fed

Vital Statistics:

	Last	Change
S&P Futures	2163.0	7.0
Eurostoxx Index	347.6	5.0
Oil (WTI)	46.0	0.7
US dollar index	86.1	-0.2
10 Year Govt Bond Yield	1.65%
Current Coupon Fannie Mae TBA	103.3
Current Coupon Ginnie Mae TBA	104.2
30 Year Fixed Rate Mortgage	3.56

Markets are higher after the Fed maintained interest rates yesterday. Bonds and MBS are up.

The Fed kept interest rates unchanged yesterday, and released new economic projections. Most members expect the Fed to hike another 25 basis points this year according to the dot plot. They tweaked their economic projections slightly, taking down their GDP forecast for 2016 and inching up their unemployment forecast. Longer term projections were unchanged. Three members dissented, wanting to hike rates in September. 

In her press conference, Janet Yellen was careful to say the Fed was confident in the economy: "Our decision does not reflect a lack of confidence in the economy, Conditions in the labor market have strengthened and we expect that to continue, and while inflation remains low we expect it to rise to our 2 percent objective over time." She also guided that the default path was for one more rate hike this year, assuming no major changes in the economy: "I would expect to see (a rate increase this year) if we continue on the current course of labor market improvement, and there are no major risks that develop and we stay on the current course."

Bonds rallied on the Fed's announcement, and that is carrying over this morning as markets rally worldwide. 

FWIW, Bill Gross isn't buying that the Fed is "data dependent." He thinks they are "market dependent." 

In other economic news this morning, initial Jobless Claims fell to 252k last week. 

The Chicago Fed National Activity Index fell to -.55 last month, which confirms the slowdown we have seen in other indicators. The 3 month moving average is slightly negative, which means the economy is growing, albeit below trend. 

Delinquencies and foreclosures continued to fall in August, according to Black Knight Financial Services. The rally in bonds from Brexit caused prepayments to spike, with prepayment speeds hitting a 3 year high. 4.24% of all homes are delinquent and just over 1% are in foreclosure.