My Kuroda! Japan Conducted Its Second Currency Intervention This Week (The Peril Of Bad Fiscal And Monetary Policies)

In the time (dis)honored tradition of Haruhiko Kuroda, the former governor of the Bank of Japan, Japan likely conducted its second currency intervention this week, current account figures from the central bank suggest, in another sign of the government’s intensified battle to prop up the yen.

Tokyo’s latest entry into the market was likely around ¥3.5 trillion ($22.5 billion), based on a comparison of Bank of Japan accounts and money broker forecasts.

The BOJ reported Thursday that its current account will probably fall ¥4.36 trillion due to fiscal factors on the next business day of Tuesday. That compares with the ¥833 billion average forecast by money brokers of what the number would be without intervention.

The figures, released less than a day after the yen jumped sharply during US trading hours, indicate that Japanese authorities made the unusual move of stepping into the market shortly after a Federal Reserve meeting when investors were still digesting the announcement. That would signal the finance ministry is taking an increasingly aggressive stance in what could become a prolonged fight to support the yen.

“With Japanese holidays and US jobs data coming up, it was a very good time for the authorities to tackle speculators,” said Yuya Kikkawa, an economist at Meiji Yasuda Research Institute. “This will have a great impact on the market. I sense a strong determination by the authorities to defend the 160-yen-per-dollar line.”

The latest swing in the yen follows a similarly sudden jump on Monday. Central bank accounts suggested Monday’s move was likely an intervention by Tokyo worth around ¥5.5 trillion, close to the daily record of ¥5.6 trillion set in October 2022.

Ahead of the move late Wednesday in New York and early Thursday in Tokyo, Central Tanshi Co. and Totan Research Co. had forecast a ¥700 billion decline in the BOJ’s current account balance due to fiscal factors including government bond issuance and tax payments. Ueda Yagi Tanshi projected the balance to drop by ¥1.1 trillion.

The calculations based on a comparison of those estimates and the central bank accounts offer only ballpark figures rather than specific amounts. Similar analysis proved accurate in showing that a jump in the yen in jittery markets in October 2023 was not the result of Japan stepping in to buy the currency.

The calculations also estimated the size of intervention on Oct. 21, 2022 at around ¥5.5 trillion, closely matching the actual amount.

An official monthly figure for the size of intervention will come out on May 31. Traders will need to wait until August or later to see daily operation data.

Japan’s top currency official Masato Kanda declined Thursday to comment on whether the finance ministry had intervened two hours earlier in Tokyo, when the yen strengthened sharply against the dollar. Japan’s currency briefly touched 153.04 from around the 157.50 mark.

Kanda oversaw the previous cycle of interventions in 2022. The ministry bought the yen around 30 minutes after the BOJ’s governor press conference ended in September that year. Another round of moves came a month later with back-to-back business day interventions.

The pattern of Japanese officials declining to comment is aimed at keeping market participants in the dark. A lack of immediate clarity may help keep traders more on edge and less willing to bet against the yen even if the ministry hasn’t actually taken action.

“By acting right after the Fed decision and outside of Japan hours, they dished out a warning that they are in a position to intervene 24 hours a day,” said Hirofumi Suzuki, chief FX strategist at Sumitomo Mitsui Banking Corp.

“We are still waiting for US employment figures during the Golden Week holidays and depending on the outcome of that data, there is a risk of further intervention,” he said.

The US is having its own currency problems under Biden with its own bad fiscal and monetary polcies. The Purchasing Power of the US Dollars has fallen 17% under Biden.

Fed Will Likely Pause For 6th Straight Meeting (Mortgage Rates Are Already Up 161% Under Biden, MBS Returns Terrible!)

The Fed will likely pause rate cuts/increases when The Fed reveals their plans today.

Breaking: Federal Reserve officials are likely to hold interest rates steady at 5.25-5.5%—a 20-year peak—for a 6th consecutive meeting.

With inflation still high, rate cuts seem off the table for now.

Rate decision at 2pm Washington time.

The Street seems aligned.

Conforming rates are already up 161% under Biden.

According to Fed Funds Futures, no rate changes until after the Presidential election.

MBS returns have been abysmal under Biden/Powell.

Simply Unaffordable! Mortgage Demand (Purchase Applications) Fall 14% Compared To One Year Ago While HUD Energy Rules Will Add Up To $31,000 To New Home Prices (Payback Time Is 90 Years)

Housing in the US is simply unaffordable, particularly after HUD levied new regulation rising the cost of new housing up to $31,000. Wait for this to kick into the data for mortgage demand!

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 26, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.4 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent lower than the same week one year ago.

The Refinance Index decreased 3 percent from the previous week and was 1 percent lower than the same week one year ago.

MBS returns are weak and volatile.

How is the Biden Regime making homeownership more affordable? They aren’t. The are using regulations, to drive the cost of new housing way up. New HUD energy rules will raise the cost of home construction by imposing stricter building codes. The National Association of Home Builders says the energy rules can add as much as $31,000 to the price of a new home. Payback time is 90 years (how long it will take the recoup the initial investment).

Under Biden’s “leadership” we are all addicted to gov. But at least Ukraine and Zelenskyy will be getting a guaranteed 10 years of financial support from the US … while E Palestine Ohio and Maui remain destroyed.

Keep On Printing! Home Prices Continue To Soar, Case-Shiller National Index UP 6.4% YoY In February

Janet Yellen, world class propagandist (US version of Baghdad Bob) and US Treasury Secretary under Biden, was so wrong about inflation. Instead of being “transitory”, turns out to be seemingly permanent.

Today’s Case-Shiller home price report was released for February. The National Home Price index was up 6.4% year-over-year. But look at the explosion of M2 Money and home prices. Hmm.

If we look at home prices and M2 Money on a year-over-year (YoY) basis, we can see the surge in money printing with COVID and the corresponding surge in home prices. As M2 Money growth slowed, the Case-Shiller National HPI slowed as well … until The Fed slowed the declined in M2 Money growth resulting in rising home price growth again.

So, The Fed will likely have to keep on printing. You can see Janet Yellen dancing to the thought of printing more money.

The Green Slime! Ford Lost $132,000 On Every Electric Vehicle Sold In Q1 (Hertz Ups Sales Of EVs To 30,000 As China Dumps US Treasuries)

The Green Slime! The global movement towards Green Energy (or global Marxist movement) is really The Green Slime! Or maybe it should be renamed “The Red Slime.”

Ford lost $132,000 on every electric vehicles they sold in Q1. It was so bad that even CNN reported it!

And then we have Hertz dumping its inventory of EVs. A slew of used Teslas have hit the Hertz car sales website after the company announced Thursday it planned to sell off 10,000 more electric vehicles from its fleet than originally planned, bringing the fire sale’s total to 30,000. Perhaps one of the reasons you can get such a good deal on a Tesla at Hertz right now is that the outlook for EV value retention is pretty grim at the moment.

Given the incidents of electric cars catching fire, perhaps saying its a fire sales is a bad choice of words. But what it says is that DESPITE massive incentives to buy EVs, consumer demand stinks. Although Transportation Secretary Pete Buttigieg will claim the market is booming.

How bad is the trainwreck that is the Biden Regime? China is bailing on US Treasuries.

Then we have the harpies on The View claiming that the solar ecilpse is caused by … global warming. Also earthquakes. Sunny Hostin must have taken different courses that I did in college.

The Biden Regime is hereafter known as The Green Slime, given their horrible policies. Unfortunately, The Green Slime is here already … and Hertz knows customers don’t want them at least on a temporary basis.

Traders Now Pricing In One Rate Cut This Year, But Not Until The End Of 2024, After The Election (Home Prices UP 32.5% Under Biden, Mortgage Rates UP 160%)

The Federal Reserve is playing the song “Don’t rock the boat” ahead of the Presidential election. Despite the horrible economic news.

1) 4 months of hotter inflation (like today’s stagflationary GDP report)

2) Nearly 1.5 million full-time jobs decline with 1.9 part-time jobs created over a year

3) $2 trillion annual deficits

Leading traders to price in 1 rate cut in December 2024. AFTER THE PRESIDENTIAL ELECTION!

Under Biden, home prices are up 32.5% and conforming 30Y mortgage rates are UP 160%.

One of my colleagues at George Mason University in finance (an economics PhD) constantly quoted Lenin’s famous “You have to break a few eggs to make an omelet.” But why is it always OUR eggs that have to be cracked, never the wealthy elite.

Stagflation Alert? Bidenomics Is REALLY COVID-Related Spending (Q1 Real GDP Was 2.97% YoY, 1.6% QoQ While The Federal Government Spending Was 4.21% YoY, Core PCE Price Index Rose 3.7%!)

COVID was a gift to Biden. The furious Federal spending of Q2 2020 through Q1 2021 helped keep GDP growth above recession levels.

Ignore Biden’s demented rants/lies about cutting the debt in half. Biden has claimed he cut the $34+ trillion national debt by $7 billion, $1.4 trillion, $1.7 billion, $1.7 trillion, and “in half,” depending on the day he rants. He did no such thing. He is confused and is talking about the BUDGET DEFICIT (don’t look to Snopes to fact check “Trucker Joe”, they really only fact check Trump).

Not surprisingly, the Federal deficit spiked with the Covid lockdowns. But when the economy reopened, the budget deficit shrunk because … the economy was open and Federal tax receipts soared. But we are back to rising deficits again.

Today, Q1 GDP numbers were released and it looks great. Real GDP year-over-year was 2.97% while Federal government expenditures YoY were 4.21%. But the US is still processing the tidal wave of COVID-related spending out of Washington DC (red line). The YoY growth in Federal spending was 86.4% in Q2 2020, 48.9% in Q3 2020, 22.4% in Q4 2020, and 67.8% in Q1 2021. Like The Titanic trying to avoid the iceberg, it takes a while for massive Federal spending to work itself through the economic system.

On a QoQ basis, US GDP increased by only 1.60%. Here are the contributions to GDP.

GDP QoQ was up 1.6% while Core PCE Price Index rose 3.7%. Yikes!

Are we entering Stagflation with the worst GDP print in 2 years as prices soar. As COVID stimulus seems to be wearing out.

The election campaign for Biden should be Lloyd Price’s “Stagger Lee.” Redone as “Stagflation Joe.”

China US Treasury Holdings Down To 2009 Levels As US Treasury Yields Climb (Why Mortgage Rates Will Continue To Rise)

President Obama selected Slow Joe Biden as his Vice President because 1) he was white and 2) an alleged foreign policy wizard in The Senate. Between Afghanistan, Ukraine, Israel, Taiwan and every other foreign policy disaster under his leadership, I am beginning to doubt Biden’s foreign policy acumen. For example …

For the 9th month of the last 11, China’s Treasury holdings declined in February (the latest TIC data), dropping by $22.7BN. Additionally, it has now been 24 of the last 28 months that China’s Treasury holdings have declined, now back at practically its lowest level since June 2009…

Source: Bloomberg

While we are acutely aware of the fact that ‘correlation is not causation’, one would find it hard to argue that the practically perfect concomitance of China’s Treasury holdings and the yield of the US 10Y Treasury note over the past three years makes us wonder (in our out-loud voices), if – away from The QT, The FedSpeak, the macro-economy, the geopolitical crises, the AI-hype, the growth scares – if it’s not just all a well-managed (slow and steady) liquidation of China’s (still massive) US Treasury holdings…

Source: Bloomberg

It’s hard to argue they don’t have an incentive to a) de-dollarize, and b) not liquidate it all at once, shooting themselves in the face.

While the de-dollarizing has been steady in Treasury-land (enabled by a vast sea of liquid other players), things have been a little more ‘obvious’ in the alternative currency space – i.e gold.

The 2015 jump in the chart below was when China suddenly admitted to its gold holdings (well some of them we assume) after no disclosure since 2009. Since then both China and Russia (the gold line below), have been hoarding the precious metal while dumping Treasuries…

Source: Bloomberg

And in case you wondered, it’s not just China and Russia, world reserve Treasury holdings are ‘relatively’ flat (based on Fed’s custody data) while according to The IMF, the world’s sovereign nations have been buying gold with both hands and feet…

Source: Bloomberg

…happy to take whatever retail-ETF-sellers are offering into their physical vaults…

Source: Bloomberg

Finally, as we note in the chart, this all started to ‘escalate quickly’ when Washington really started to weaponize the dollar.

Assuming that all the US gold is still in Fort Knox (and assuming that China and Russia are honest about their holdings), the world’s ‘other superpowers’ are rapidly catching up to the US’ holdings…

Source: Bloomberg

Who could have seen that coming? With mortgage rates hitting 7.5%, the home price to median household income ratio just hit an all-time high.

The 10Y Treasury yield just hit 4.519%.

And we have The Federal Reserve posting record losses.

Did we REALLY elect this fool Biden as President??

Mortgage Purchase Applications Rise 3.3% Since Last Week, But DOWN -10% Since Same Week Last Year (Goin’ Down!)

Mortgage application increased on the latest survey from the Mortgage Bankers Association, but mortgage purchase application are still down compared to one year ago.

Mortgage applications increased 3.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 12, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 3.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 4 percent compared with the previous week. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 10 percent lower than the same week one year ago.

The Refinance Index increased 0.5 percent from the previous week and was 11 percent higher than the same week one year ago.

Bidenomics, a massive subsidy to the political donor class, but heartless towards the middle class.

Debtflation Nation! Fed Gov’t Spending $2 Billion PER DAY, Debt To GDP Headed To 200%, Electricity Costs SOARING

Biden and Congress have never met a project that they weren’t willing to fund (except a border wall with Mexico, of course).

Inflation is heating up again as the Federal government continues to spend.

4-5% by November…

US CPI on trend for 4-5% at US election in November.

Source: BofA

Above 5%…?

Strong CPI raises market probability of YE25 rates above 5%.

Source: Goldman

Cyclical inflation remains too elevated

“Our measure of cyclical inflation–which should capture the impact of excess demand on prices–appears to be stuck at around 5%, which is too elevated”

Source: Safra

US alone

The US is the only economy in the G10 where the latest inflation print surprised to the upside.

Source: Goldman