NeWS to KnOW

I think it is worth noting any time the Fed chooses to cut short-term rates - the action is taken with the expressed intention of stimulating economic growth. The "so what" factor here is that investors in the bond and mortgage-backed securities markets are keenly aware of the fact that accelerating economic growth ultimately leads to an increased demand for capital - which in-turn ultimately pushes mortgage interest rates up.

In the world of mortgage interest rates, the benefit of a fed fund rate cut is simply a function of a reduction in mortgage investors' short-term cost of capital - i.e. warehouse lines of credit. A change in the overnight lending rate commercial banks charge each other for funds to meet their reserve requirements (fed funds) - and a 30-year fixed-rate mortgage - have little other direct correlation - as we've all witnessed over the course of the past month or so.