Except for targeting the long end of the yield curve less than expected and purchase sizes a hair lower than anticipated, the Federal Reserve’s quantitative easing plan matched market expectations for incremental purchases that could be adjusted in line with evolving market conditions going forward.
There had been expectations for Fed purchases in long—term Treasury maturities beyond 10-years that were not met, Michael Gapen, director, U.S. economic research, Barclays Capital, told this publication. This would be unlikely to affect mortgage rates as these are tied most closely to the 7- and 10-year portion of the curve, given the average duration loans have in the current market.
At $75 billion per month, the purchase size was slightly lower than average expectations for purchases for about $100 billion in size, he said. The committee currently plans to buy another $600 billion in longer-term Treasury securities in total by the end of the second quarter of 2011.
