The EUR/USD reached a breath-taking 1.4070 level from the 1.3670 level in early US trade as the Fed has opened the monetary spigots to an extent never before seen in US history. Mortgage backed securities are soaring as a result of the Fed’s vow to buy “large quantities” of Agency debt and MBS.

Yields are tumbling on that news which policymakers hope will lure new buyers of homes into the market to begin soaking up some of the overhang of inventory that plaugues housing prices (and ultimately the financial sector). As noted in earlier posts when the Fed first raised the subject of quantitative ease, mortgage refinancing could put billions of dollars into the economy, either through spending or investment, as rates fall to levels not seen since George Bailey ran the building and loan.