Tags: BlackRock | Mortgage | Market | Suffer | Fed | Absence

BlackRock: Mortgage Market Won’t Suffer from Fed Absence

By Dan Weil   |   Friday, 09 Apr 2010 09:12 AM

Mortgage bonds will suffer only slightly from the March 31 end of the Federal Reserve’s $1.25 trillion purchase of those bonds, says Curtis Arledge, chief investment officer for fixed income at BlackRock.

The market has known about the Fed’s move for months, Arledge notes.

“It’s been one of the more telegraphed changes we’ve seen in a long time,” he says.

“The Fed obviously has played an important role in the mortgage market over the past several months,” he told Bloomberg.

As a result, “mortgage spreads could widen a bit,” he said. But, “The marketplace has positioned itself for the Fed to be absent.”

The Fed’s absence will cause more volatility in the market, Arledge says.

“The housing market will be choppy for a while.” The Fed stepped in to provide capital when investors were unwilling to take on any kind of risk, he explains.

“The Fed helped stabilize lending to a challenging sector.”

But housing isn’t out of the woods yet, he maintains.

“The sector is still challenged. One part of the market we haven’t seen recover yet is lending for non-agency mortgages, and that’s a very important part of the market.”

Others see trouble ahead for housing too.

“We expect housing prices to fall another 5 percent in the coming months," Paul Dales of Capital Economics told CNBC.

"We've actually seen some declines in areas of the country. That's going to put a halt on any housing recovery."

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Mortgage bonds will suffer only slightly from the March 31 end of the Federal Reserve s $1.25 trillion purchase of those bonds, says Curtis Arledge, chief investment officer for fixed income at BlackRock. The market has known about the Fed s move for months, Arledge...
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2010-12-09
 

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