The Federal Open Market Committee (FOMC) of the Federal Reserve announced a plan to sell short-term Treasury securities and use the proceeds to purchase longer-term securities in an effort to place downward pressure on longer-term interest rates and boost broader financial conditions.
The target for the FOMC is by the end of June 2012, to purchase $400 billion of Treasury securities with maturities of 6 to 30 years, and sell off an equal amount of treasuries with 3 years or less remaining maturities.
Additionally, to bolster conditions in mortgage markets, the FOMC intends to reinvest principal payments from agency debt and agency mortgage-backed securities holdings into more agency mortgage-backed securities.
Responding to the move, bond prices spiked, pushing yields down. It is likely that the efforts of the FOMC will help keep interest rates at all time lows. This will likely help support on-going stability in the pricing in the secondary market on HECM loans.
