It seems unlikely that there will be any meaningful tightening in 2013.
The Federal Reserve has identified a low mortgage rate as a meaningful means of stimulating the economy. As it happens tight lending restrictions have meant only a select few have been able to take advantage of the lower rate. Were anything to happen which allowed the mortgage rate to rise quickly then it would likely stifle the nascent recovery. US housing is at record levels of affordability however a more simple price to income ratio makes the case far less compelling. It is the Federal Reserve’s low mortgage rate which allows the pent up demand for housing to dissipate through the economy.
Having begun to use the yield curve as a monetary policy tool, it is unlikely that the Federal Reserve will simply abandon it to market forces overnight. Having committed to a low Fed Funds rate into 2015, and until the unemployment rate dips below 6.5%, the Fed are unlikely to allow rising bond yields to stall the recovery.
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