Ever since the Federal Reserve Board reversed course on Feb. 4 by raising the federal funds rate by a quarter of a percentage point for the first time in five years, the financial markets, and especially the mortgage market, have gone bonkers. To date the Fed's cumulative policy actions have elevated short-term rates by 1.25 percentage points and longer-term bond yields have risen by at least that much while also exhibiting volatile mood swings.

Further, equity values have bounced with bonds, falling in and out of favor depending on daily interest rate gyrations. On the recent news of the Fed pushing the federal funds rate up to 4.25% from 3.75%, bond prices soared and then several days later retreated. Are the markets finally comfortable with current Fed policy or will the markets continue to exhibit this frenzied behavior until the Fed completes all of its monetary policy objectives?

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