Impact of Fed rate vs mortgage rate

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This is the impact of lender of last resort

Someone posted in reddit like this: (I do not understand whole topic).

  • A better way of saying it: A number of financial institutions overextended themselves, and so the Fed exerts its role as “lender of last resort” and bails them out.

  • In a more cutthroat version of capitalism, interest rates would rise to attract more private capital, and along the way, a number of bankruptcies of weak or poorly run institutions would likely occur.

The whole day, I read so many pages of documents why NY FED pumped-in 200 Billions cash, why yield curve inverts (where the demand is) and why J.Powell reduced Fed rate.

In short, the demand is coming from overseas, Japan…Euro banks are buying US Treasuries as US has higher yield than their currencies/countries… That results yield curve inversion…

As long as US keeps higher rate, foreign banks tries to get the rate spread holding US Treasuries. By reducing rates, FED expects the inversion comes down…etc.

It is a big subject and my understanding is half baked.

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I bet the fed reducing the balance sheet has more impact than actual rate. Other buyers will demand a higher return on the MBS.