They’d piled into the new “risk sharing RMBS bonds” issued by Fannie and Freddie. Wall Street provided 80% leverage. Buying frenzy ensued. But it didn’t last long.
Fisher reports from inside the FOMC: it’s getting more hawkish and will hike interest rates sooner than expected. Markets are in denial. Not going to be pretty.
Investors’ forecasts of rate hikes are well below those by Fed governors. “And it wouldn’t be good” if the gap gets closed “with great rapidity,” frets Fed Governor Lacker.
