Wow look at that curve. the 50bps cut just LOWERED affordability for the remaining homebuyers that were left. crazy times.
I'm short some ZN right now. Here's how I look at it- if the Fed raised rates several times and the 10 year rate went down, when they cut rates the curve should steepen and the 10 year rate should go up. More liquidity --> more inflation risk --> higher longterm rates
The Fed wants a steeper yield curve. If banks are losing money on sub-prime mortgages, they'll have to make back that money by borrowing at lower short term rates and lending at higher long term rates. So far, their rate cut has worked.
That works for the banks, but not for the consumer. As OP stated, mortgage rates are now moving up. So banks dodge a bullet but earnings are flat as housing has no bump to help out consumers. Rosy, just rosy.
Who cares about the consumer? Not the Fed! But seriously, banks losing billions and bank runs would hurt consumers even more.
In fact, the reason of this move is more important than the move itself. Is it because of the above reasoning quoted from wikipedia or just because of foreign investors leaving USA bond market because of weak $.