Following an impressive nonfarm payrolls print in the first week of the new month, the second week of December held another round of key events for investors, with the highlight being the mid-week Federal Open Market Committee meeting with expectations of a QE4 announcement.
Indeed, the Committee did not disappoint. It announced it would begin a program of purchasing longer-term Treasuries at an initial pace of $45 billion per month beginning in 2013 following expiration of Operation Twist at the end of December. It also reaffirmed its policy of buying $40 billion per month in Agency MBS, as well as, reinvesting paydowns from its Agency MBS and debenture holdings back into MBS. "Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the Committee said in its statement.