Ed Neuhaus 
The Fed cut rates a full point last year. Mortgage rates went up. So when I hear people saying the Warsh nomination is going to change things, I get it, but I think we’re looking at the wrong thing.
Here’s where I’m actually looking. Mortgage rates follow the 10-year Treasury, not the Fed funds rate, right. And the 10-year right now is getting pushed around by two things that don’t care who’s in the Fed chair. The first is the yen carry trade. About half a trillion dollars has been slowly unwinding, and every time it moves it creates volatility in global bond markets. The second is geopolitical risk. We saw that add more than 10 basis points in a single week in March. That’s a real rate move, and nobody in DC made that decision.
For what it’s worth, Warsh has been vocal about wanting to shrink the Fed’s mortgage-backed securities holdings. That’s upward pressure on rates, not downward. So my take is pretty simple. The nomination is smoke. The bond market is the fire. That’s where I’d be paying attention.
