EDV - Should The Fed Buy Treasuries Or Agency MBS During QE? Yes

• While it would be difficult for the Fed to ease financial conditions by lowering Treasury rates further, there remains substantial room within the agency MBS market to narrow spreads.
• Lower mortgage rates should allow more people with higher mortgage rates to refinance and more people who are uneconomically renting the opportunity to buy a home.
• We believe the Fed's continued purchases remain a necessary and powerful tool to normalize this relationship and allow a seamless transmission mechanism of monetary policy to occur.

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