A change in Federal Reserve officials' position on the balance between inflationary and deflationary risks surprised the market Tuesday afternoon, ultimately leading to an increase in rate-indicative bond yields.The shift in the Fed's bias from deflationary to neutral, which accompanied their expected decision to leave rates unchanged, was "entirely unanticipated" and caused some market volatility, according to Steve Stanley, managing director and senior market economist at RBS Greenwich Capital. Mortgage-backed securities initially rallied after the Fed's statement, but then weakened, boosting rate-indicative yields higher, said Barry Habib, author of the Mortgage Market Guide interest rate consulting service for originators. The rate-indicative 10-year Treasury yield, which had fallen near 4.2% at one point in recent days, returned to its previous level closer to 4.4% after the Fed's statement, according to Yahoo!Finance.

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