Did quantitative easing reduce US mortgage rates?

Submitted by: BBlack 104

Yes, quantitative easing did reduce us mortgage rates.
This short answer was generated by aggregating the answers that each of the 3 studies below gave to the question (as indicated by State of K members) and adjusting for source quality and other factors. If key studies are missing or the answers attributed to individual studies are incorrect, the above answer could be wrong.


Chart summary of 3 studies examining this question

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SUMMARIES OF STUDIES
Total studies in list: 3
Sorted by publication year
1
The Effects of the Fed's Quantitative Easing Announcements on the U.S. Mortgage Market: An Event-Study Analysis
"This paper uses regression based event-study analysis to examine the response of the 30-year mortgage rate to the Federal Reserve’s Quantitative Easing (QE) announcements in zero lower bond period. A total of 35 QE announcements from 2008 to 2015 are selected in reference to previous literature and my own discretion. Each announcement is then identified by a certain type and in a QE round. After model validation, the best-fitting IGARCH model with skewed t distribution is used to measure the QE announcement effects on daily changes of 30-year mortgage rate, 30-year Treasury rate and the spread between them. Abnormal returns (changes), cumulative abnormal returns and their long-run values of the mortgage rate for each announcement within 1-day, 3-day and 5-day event windows are calculated and reported. In event windows, announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news conveying a continuation of the current QE policy diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. Two robustness checks find that the shocks of macro-economy and mortgage rate determinants were trivial in influencing abnormal returns and cumulative abnormal returns of the mortgage rate on average, and the results do not change so much if the model is controlling for the 10-year Treasury rate instead of the 30-year Treasury rate."
AUTHOR
Gang Wang
PUBLISHED
2016 in SSRN Electronic Journal
UNRANKED SOURCE
Yes
Yes
2
How the Federal Reserve's Large-Scale Asset Purchases (LSAPs) Influence Mortgage-Backed Securities (MBS) Yields and U.S. Mortgage Rates
"We conduct an empirical analysis of the Federal Reserve's large-scale asset purchases (LSAPs) on MBS yields and mortgage rates. The Federal Reserve's accumulation of MBS and Treasury securities lowered MBS yields and mortgage rates by more than what would have been suggested by changes in market expectations alone, suggesting that portfolio rebalancing effects of LSAPs are an important consideration for monetary policy transmission. Our estimates also suggest that the Federal Reserve must hold a substantial market share of agency MBS or of Treasury securities to significantly lower MBS yields and in turn significantly lower mortgage rates."
AUTHORS
S.Wayne Passmore
Diana Hancock
PUBLISHED
2014 in FEDS Working Paper
UNRANKED SOURCE
Yes
Yes
3
Fed Asset Buying and Private Borrowing Rates
"Past rounds of large-scale asset purchases by the Federal Reserve have lowered yields not onlyon the targeted securities, but also on various private borrowing rates. In particular, yields oncorporate bonds and primary mortgage rates decreased in response to Fed asset purchaseannouncements. Notably, however, the link between rates on mortgage-backed securities andactual mortgage rates has weakened in the wake of the financial crisis."
AUTHOR
Michael D. Bauer
PUBLISHED
2012 in FRBSF Economic Letter
UNRANKED SOURCE
Yes
Yes







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