Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
We’ve got a line on The Federal Reserve. They don’t seem to care about housing and the mortgage market.
Monthly mortgage payments are soaring as home prices soar AND mortgage rates soar.
Mortgage rates have soared with Fed noose tightening.
Something has to give. Otherwise, winter is coming.
The theme song of The Federal Reserve thinking that rising prices can be tamed by raising rates is “Dear Mr Fantasy.”
As The Federal Reserve tightens the monetary noose (Fed Chair Powell said Fed ‘acutely focused’ on returning inflation to 2%), the US economy is slowing. In fact, May’s Industrial Production report is half of what was expected. Industrial production declined to 0.20% MoM versus the expected 0.4%. At the same time, capacity utilization rose slightly to 79%., but still below expectations.
Mortgage rates are rising rapidly, but the growth has cooled slightly as the economy cools.
Bitcoin is getting demolished by The Fed’s reaction to inflation.
And “It’s Not Always Sunny In Philadelphia.” Since the Philadelphia Fed’s Business General Conditions has dropped into negative territory with, among other things, The Fed’s monetary tightening. And they’ve only just begun (no Carpenters’ songs!).
Here is Phil Hall’s article on housing and The Federal Reserve’s noose tightening. US housing starts dove -14.4% MoM as mortgage rates soared.
If the Biden Administration and Federal Reserve jointly produced a dating site …
But its most central banks too. Look at German home prices against the ECB’s balance sheet
I couldn’t sleep at all last night … after The Fed cranked up their target rate 75 basis points.
The odds of a recession grew to 71.7% as The Fed hikes rates.
Over the next 24 months, the probability of a US recession is 98.5%.
The NASDAQ index tanked -4% today on the fallout from yesterday’s Fed actions.
Do I detect a trend in The Fed’s latest Dot Plot??
So, will The Fed continue to go head-over-heels on monetary tightening?
Like in the movie The Poseidon Adventure, we can all sing “The Morning After.”
On the heels of The Fed’s 75 basis point surge in the target rate, the US Treasury yield jumped +11.5 BPS as of 8:30 AM EST. The S&P 500 E-mini futures contract is down -1.8%.
As investors brace for a recession, mortgage rates dropped to 6.03%.
Gasoline prices remain near $5 per gallon, diesel prices are near $6 per gallon and The Fed’s massive balance sheet is still in force.
On the housing front, US housing starts plunged -14.4% MoM in May, the biggest decline under Biden.
While housing starts were down -14.4% MoM in May, single-family detached home were down only -9.16%. It was 5+ unit (multifamily) starts that were down -26.83% MoM.
Good morning peeps! Reality is dawning after the market surge yesterday after investors celebrated that The Fed could have raised rates even more.
Sometimes I wonder if The Federal Reserve Board of Governors pays attention to economic news. For example, the Atlanta Fed’s GDPNow forecast for Q2 was released today at -0.002%. So what does The Fed do? They raised their target rate by 75 basis points to 1.75%.
Apparently, The Fed has chosen to fight inflation rather than help the economy.
While expected, it is still unwelcome news.
The Atlanta Fed’s GDPNow real-time GDP forecast for Q2 just sank into negative territory at -0.002%.
Let’s see how Real GDP does if The Fed actually withdraws its stimulus needle.
And consumer purchasing power keeps diving as The Fed keeps printing money.
I just read that President Biden has never been more optimistic about the US economy than he is now.
Well, today’s closing bell is not optimistic and is downright bearish.
The US Treasury 10-year yield rose … ANOTHER … 11.3 basis points as rumors circulate that The Fed might actually raise their target rate by 75 basis points.
And the venerable Dow (DJIA) is down -152 points today.
Markets are anticipating an increase of The Fed Funds target rate from 1% to 1.568%, less than the rumored 75 basis point increase being bandied about.
At least Columbus Ohio home prices are growing slower than the national average.
If Biden is wildly optimistic about the economy, then he needs to get out of The White House and talk to average Americans and not people like Robert De Niro.
US home prices are still skyrocketing as The Federal Reserve kept its massive foot on the monetary accelerator pedal.
CoreLogic’s home price index grew at a 20.9% YoY pace in April, but is expected to slow to 5.6% YoY in late 2022.
Remember peeps, The Fed still have its staggering monetary stimulypto in place.
The Fed is signaling its withdrawal of stimulus, causing mortgage rates to soar.
Given the slowdown of the US and global economy, we shall see if The Fed keeps to its tightening plans. As of today, the market is expecting The Fed to raise its target rate from 1% to 3.819% by February 2023. That is a 291% increase in The Fed’s target rate.ng
The Fed trying to tame inflation (caused by The Fed and Biden’s energy policies and Congressional spending) is like Curly trying to eat oyster stew.
It was closing hell for a terrible day in markets as investors struggle to process the dreadful and seemingly endless inflation report on Friday.
What happened today? The NASDAQ tanked -4.58% and the 10-year Treasury yield jumped 22.2 basis points. Gulp.
The 22.2 bps jump in the 10-year Treasury yield has led to Agency MBS prices pulling a Titanic and sank.
Somehow, I don’t think that Biden and Congress are going to help the middle class and low-wage workers.
Today’s opening bell is “Opening Hell!”
US Treasury 10Y yields are up +12.1 basis points as of 9:40am EST. And rising across the globe.
Equity markets? Dow is down -621.93 points and the NASDAQ is down almost -3%. But equity markets are down across the globe.
Commodities? Once again, all commodities in the red except corn (which I don’t eat) and natural gas.
Speaking of opening hell. The US Treasury 10Y-2Y yield flattened to 7 basis points.
And then we have Markit’s Credit Default Swaps index rising to the highest level since Covid (April 2020).
Markets are in a “Sea of Red.”
You must be logged in to post a comment.