The current QEIII program, the $85 billion per month Treasury and mortgage bond purchasing experiment rolled out by the Federal Reserve in 2012 I scheduled to end later this fall. The Fed has been artificially inflating interest rates by this unprecedented purchase of securities. In November of 2008qeIII ending soon the Fed announced an initial purchase of $600 billion then purchased another round of $600 billion in 2010.

These were labeled QEI and QEII respectively. The current QEIII program has been purchasing $85 billion per month beginning in September 2012. This interest rate support held the demand for such securities, keeping rates low.

The markets for a time played a guessing game with the Fed, as is normal practice, regarding when the third and final QE program would come to a halt. In June of 2013, then Fed Chair Ben Bernanke made an official announcement regarding the ultimate end. Rates from May to June of 2013 rose at a clip not seen in 26 years as the 30 year mortgage rate topped at 4.51% at the end of June.

Since then though, mortgage rates have steadily drifted lower and according to Freddie Mac’s weekly mortgage survey, the 30 year note hit 4.12% yet again, matching its 2014 lows and significantly lower than the same period last year. So what’s going on?

The QEIII stimulus has been methodically reduced by $10 billion after each Fed meeting, which occurs about once every six months and as you read this, the monthly purchases have fallen to a $35 billion level. In spite of this drop mortgage rates have actually fallen while the so-called stimulus program has been winding down. If the markets reacted in the same manner they did in June of 2013 when the end of the QE program was first announced, mortgage rates should be higher, not lower. That tells us that the stimulus program’s demise won’t matter very much. So far, it hasn’t.