Sink The Bismarck! German 10yr REAL Yield Plunges To -7.89% (US REAL 10yr Yield At -4.43%)

Sink The Bismarck! Or at least sink the German economy.

Between going green and the war in Ukraine, Germany is seeing economic distress (high inflation) and a -7.89% Real 10yr yield. At least the US is seeing “only” a -4.43% REAL 10yr Treasury yield.

Like the US, I wonder who in Germany studied game theory? That is, going green leaves nations vulnerable to foreign nations oil and natural gas supplies. Like Russian natural gas.

The Nash equilibrium is a decision-making theorem within game theory that states a player can achieve the desired outcome by not deviating from their initial strategy. In the Nash equilibrium, each player’s strategy is optimal when considering the decisions of other players.

Unfortunately, the US and Germany have deviated from the initial strategy are are paying dearly with skyrocketing energy prices. Particularly as we enter the winter season.

So, who blew up the Nordstream natural gas pipeline going from Russia to Germany?

I can take a guess.

UMich Buying Conditions For Houses Remain Depressed As Fed Tightens (Fed’s Brainard Calls For Fed To Keep Tightening!)

Bidenflation and The Fed’s counter-attack has caused considerable damage to the housing and mortgage markets.

Today, the University of Michigan consumer sentiment indices were released for September. Of note, buying conditions for houses remained in the tank.

Meanwhile, Fed Vice Chair Lael “Brainless” Brainard is calling for The Fed to NOT stop tightening money and raising interest rates.

As The Fed tightens, the entire range of Agency MBS TBA (to be announced) are under $100.

For example, the FNCL 2.5% TBA is now 84-17. And falling like a paralyzed falcon.

Here is Brainard with Fed Chair Jerome “Foul Owl” Powell, the dynamic duo of crashing markets.

Wipe Out! $32 TRILLION In Stock Value Wiped Out (US Core Deflator Rises To 4.9% Prompting Taylor Rule Fed Target Rate Of 9.65%, We Are Currently At 3.25%)

Wipe out!

$32 TRILLION of global stock value has been wiped out since December 2021.

Today’s core PCE deflator reading of 4.9% YoY shows that the inflation surge is not over. With a core PCE deflator of 4.9%, the Taylor Rule suggests that The Fed Funds Target Rate should be at 9.65%, far below its current level of 3.25%. So, IFF The Fed is following any sort of rule, rates should continue to soar.

And if we use headline inflation of 8.30% YoY, the Taylor Rule suggests hiking the target rate to 14.75%.

After yesterday’s dismal Q2 report of -0.6%, I fully anticipate a recession. Ain’t this a kick in the … head.

US Pending Home Sales PLUNGE -22.5% YoY In August As Fed Continues Panzer-like Assault Against Inflation And Consumers

The scalding inflation rate crippling middle class Americans and low-wage workers is causing The Federal Reserve to take action by finally tightening their monetary policy.

As such we are seeing a rapid decline in the US housing market in terms of sales. For August, pending home sales declined -22.5% YoY as expectations of further Fed rate hikes (blue line) soars. Note that impact of The Fed’s and Federal government “sugar rush” after the Covid outbreak in early 2020 and its impact on pending home sales.

Without the “sugar rush,” pending home sales are dying.

Speaking of a sugar crash, risk parity ETF is down 32% from high.

The culprit? The Federal Reserve’s Panzer onslaught! With its leader, ~~Heinz Wilhelm Guderian~~ Jerome Powell.

The Dow is up 500 points today on the expectation that The Fed will stop tightening in the face of global chaos.

As UK 10yr yields fall -50 BPS!! And US T-10 yield drop -20.8 basis points.

Here is a photo of The Federal Reserve attacking American consumers to reduce inflation caused by Biden’s green energy policies and insane spending by Biden/Pelosi/Schumer.

Will Janet Yellen and Jerome Powell be awarded Panzer assault medals for 1) leaving monetary stimulus too large for too long then 2) suddenly tightening stimulus?

Mortgage Applications Shrink To Lowest Level In 25 Years As Mortgage Rates Cross The 7% Rubicon (Refi Apps DOWN 84% YoY, Purchase Apps DOWN 29% YoY)

Alea iacta est (the dice is cast).

Mortgage applications have fallen to the lowest level in 25 years, in part due to The Federal Reserve’s tightening of monetary policy in an attempt to combat inflation.

Mortgage Net Daily is showing that 30-year fixed mortgage rates are 7.08%.

Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 23, 2022.

The Refinance Index decreased 11 percent from the previous week and was 84 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 29 percent lower than the same week one year ago.

Why Is Everything I Consume Going Up By >10% When The Inflation Rate Is “Only” 6.3% YoY? (Under Biden, Gasoline Is UP 55%, Foodstuffs UP 47%, Electricity UP 957%, Rents UP 12.5% YoY)

According to the BLS, US core inflation is 6.3% and headline inflation is 8.3% YoY. But everything I consume seems to be going up at a much faster rate?

Under Biden, regular gasoline price is UP 55%, CRB Foodstuffs UP 47%, rents UP 12.5% YoY and electricity is UP 957%.

And as The Fed continues to signal monetary tightening, the spread between 30Y FNCL Par Coupon and the 10-year Treasury yield keeps growing.

In case you watched the Buffalo Bills play the Miami Dolphins yesterday, you may remember this punt by the Dolphins. It almost perfectly represents what The Federal Reserve and Biden Administration are doing to the American middle class and low-wage workers.

The Great Bond Bubble Is ‘Poof, Gone’ In Worst Year Since 1949, MBS Bursting Too (At Least The REAL Freddie Mac Mortgage Rate Is Negative, -2.975%)

Pension funds hold large positions in US Treasuries and Agency Mortgage-backed Securities (MBS). As does America’s central bank, The Federal Reserve. All are suffering losses as The Fed fights inflation.

(Bloomberg) — Week by week, the bond-market crash just keeps getting worse and there’s no clear end in sight.

With central banks worldwide aggressively ratcheting up interest rates in the face of stubbornly high inflation, prices (created by The Fed, Biden’s Green Energy Follicies and reckless Federal spending) are tumbling as traders race to catch up. And with that has come a grim parade of superlatives on how bad it has become.

On Friday, the UK’s five-year bonds tumbled by the most since at least 1992 after the government rolled out a massive tax-cut plan that may only strengthen the Bank of England’s hand. Two-year US Treasuries are in the middle of the the longest losing streak since at least 1976, dropping for 12 straight days. Worldwide, Bank of America Corp. strategists said government bond markets are on course for the worst year since 1949, when Europe was rebuilding from the ruins of World War Two.

The escalating losses reflect how far the Federal Reserve and other central banks have shifted away from the monetary policies of the pandemic, when they held rates near zero to keep their economies going. The reversal has exerted a major drag on everything from stock prices to oil as investors brace for an economic slowdown.

And as The Fed tries to combat stubborn inflation (caused by The Fed, Biden’s Green Energy folly and reckless Federal spending), you can see the US government security liquidity is worsening.

At least inflation has produced one “positive.” REAL mortgage rates are NEGATIVE since Freddie Mac’s 30-year mortgage rate less headline inflation is currently -2.975%.

Then we have Agency MBS (example, FNCL 3% MBS) plunging like a paralyzed falcon as duration risk increases with Fed rate tightening.

Fed Funds Futures data points to tightening until May ’23, then a reversal of rate hikes.

Goodnight Irene! 2yr US Treasury Rate Rise Over 4%, Mortgage Rates At 6.55% (UP 116.2% Since Last Year)

Goodnight Irene!

Rampant inflation is really hurting American households (even Fed Chair Powell admitted as much yesterday), but because of inflation, The Fed’s counter-punch has resulted in 1) declining equity prices, declining bond prices and increase mortgage rates. In fact, over the past 12 months, the 2-year US Treasury yield is up over 15 times (0.262% to 4.226%), Bankrate’s 30-year mortgage survey rate up 116.2%.

The S&P 500 index has been generally falling as The Fed tightens their monetary policy.

Another day, another bad day on Wall Street. The NASDAQ is down 2%.

And here is a chart from Redfin. Luxury home sales sink most on record.

We’re Going Down! US Treasury 10yr-2yr Yield Curve Inverts To -54.4 BPS, Lowest Since Volcker’s War On Inflation

We’re going down!

As The Federal Reserve battles inflation (caused by excessive monetary stimulus since 2008), Biden’s green energy policies and excess Federal government spending), we can see that the US Treasury 10yr-2yr yield curve has inverted to -54.4 basis points, the lowest since 1982 after Fed Chair Paul Volcker’s war on inflation.

The US Treasury 10yr-2yr yield curve typically inverts (or goes below zero) several months prior to a recession and is most inverted since 1982.

Fed Funds futures data points to the target rate rising to 4.613% by the May ’23 FOMC meeting … then declining.

Since this is rather miserable news for the economy, I will now play my favorite Bruce Springsteen tune, Sherry Darling.

At least the Dow Jones mini-me futures are up this morning.

The US Dollar/Euro cross currency is rising with Fed tightening.

Fed Garbage? MBA Applications Rise As Households Panic About The Fed Raising Rates (Refi Applications Still 83% Lower YoY, Purchase Applications 30% Lower YoY)

As people are painfully aware, The Federal Reserve is on a mission … to hike interest rates to tame inflation back to 2%.

So, we saw a small surge in mortgage applications last week as the expectations of Fed rate hikes sinks in and households try to lock in mortgage rates.

Mortgage applications increased 3.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 16, 2022. Last week’s results include an adjustment for the Labor Day holiday.

The Refinance Index increased 10 percent from the previous week and was 83 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 11 percent compared with the previous week and was 30 percent lower than the same week one year ago.

At least the percentage of ARMs remained the same, 9.1%.

The Federal Reserve has a line on you! Or noose.

By the way, the theme song for the US version of the TV show “The Office” was written by Jay Ferguson, the primary singer for the ’60s band Spirit (that performed “I’ve Got A Line On You!”).

Here is Jay Ferguson singing the Spirit song “Fresh Garbage.” A fitting song for The Federal Reserve. Fed Garbage??

Today will be another Fed rate hike, expected to be a whopping 75 basis points. The S&P 500 tends to rally (green line) after the FOMC announcement. What will happen today?