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 Raises Target Rate By 75 BPS As Recession Looms, DOT Plots Signals Rates Rising To 4.625% In 2023 Then Reverting Back To 2.5% (Mortgage Rate Rises To 6.38%)

As expected, The Federal Reserve raise their target rate by 75 basis points today. While that sounds like an inflation (blue line)-crushing rate hike, look at the slowly shrinking Fed Balance Sheet (gold line).

Of course, the risk of a recession (dark blue line) is on the increase.

Given the increasing likelihood of a recession, The FOMC’s Dots Project shows The Fed’s target rate increasing to 4.625% in 2023, then gradually declining to 2.5% in the long run.

Fed Funds Futures data points to a peak in May 2023.

And with The Fed’s tighten-up, Bankrate’s 30yr mortgage rate rose to 6.38%.

Why is The Fed so slow to reduce its prodigious balance sheet if they REALLY wanted to fight inflation? So we can’t really say that The Fed has been turned loose to fight inflation.

Slipping Into Darkness! US Real GDP Forecast Barely Above 0% Growth (Atlanta Fed GDPNow At 0.3%) With Less Than Two Months Until Midterm Elections

Slipping into darkness … with less than two months until the US midterm elections.

Latest estimate: 0.3 percent — September 20, 2022

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 0.3 percent on September 20, down from 0.5 percent on September 15. After this morning’s housing starts report from the US Census Bureau, the nowcast of third-quarter residential investment growth decreased from -20.8 percent to -24.5 percent.

The culprit? US Housing starts!

We knew from this morning that housing starts declined -0.01% YoY as The Fed’s Stimulypto wears off.

US Housing Starts Decline -0.1% YoY In August (But Apartment Starts UP 28.57% MoM!) As Fed Removes Monetary Stimulus

The US is short on housing stock and remains short in August. While housing starts in August seems fantastic (12.8% MoM), the YoY growth in housing supply is down -0.1% as mortgage rates soar and The Fed removes monetary stimulus.

On a month-over-month (MoM) basis, 1-unit (single family detached) were up only 3.43% in August. 5+ unit (multifamly) starts were up 28.57% in August.

Since the Biden Administration has allowed over 2 million illegal to flow across the southern border, apartment space is in high demand.

According to RentCafe, the hottest rental markets in the USA are Miami, Orlando, SW Florida and … Harrisburg PA (the temporary home of uber-leftist PA Lt Governor John Fetterman). Perhaps Fetterman is letting illegal immigrants stay in his Harrisburg mansion, unlike President Obama on Martha’s Vineyard.

Why isn’t Biden letting illegal immigrants stay in his massive summer mansion in Reboboth Beach, DL?

C’mon man!

The Core! US 30y Mortgage Rate Rises (US Futures Fall as Traders Eye Supersized Fed Hike)

Even Obama’s economic advisor, Larry Summers, is wondering why Biden won’t allow pipelines to be build to reduce energy prices and reduce inflation.

Having said that, US mortgage rates are now the highest since 2008 and continue to rise with the expectation of more Fed rate hikes this year. Even core inflation is on the rise motivating The Fed to do more tightening since they aren’t receiving any help from Biden on energy or Congress in terms of massive spending of our money.

Mortgage payments for a median existing home in the US is back to the mid-1980s.

Data from Fed Funds futures implies that The Fed will raise their target rate to 4.50% by March 2023, then slowly lower rates.

Futures are down with the prospect of a 75 basis point bump in rates tomorrow. The Dow Jone Mini is down -167 points.

Powell’s Famous Chili! National Association of Home Builders Market Index Falls More Than Expected To 46 As Fed Tightens Monetary Noose (Lowest Since 2012, Excluding Covid Crash)

The National Association of Home Builders market index fell more than expected in September to 46, the lowest reading since 2012 (if I exclude the Covid economic shutdown).

Note that the NAHB market index is declining along with at the increase in the 30yr mortgage rate.

Consumer Sentiment For Housing Remains In The Doldrums As Fed Tightens To Combat Bidenflation (Atlanta Fed GDPNow Tanks To Only 0.5%)

As inflation rages thanks to Biden’s energy policies and insane Federal spending, The Federal Reserve is trying to cool inflation (or Bidenflation).

As The Fed tightens, the 30-year mortgage rate has risen to 14 year highs. And home prices are still hot, hot, hot (though slowing). But consumer sentiment for housing remains in the doldrums (UMich Buying Conditions For Houses).

The good news? Atlanta Fed’s GDPNow real-time GDP tracker shows the US economy at positive growth of 0.521%. Ok, that is kind of lousy given the massive Fed stimulus and Federal spending since Covid.

M2 money velocity demonstrates the lousy return of Fed/Federal government “investment”.Near the lowest level in US history.

So, The Fed will have to destroy the US economy to save us from Bidenflation (bad energy policies and out-of-control Federal spending).

And more good news! The NASDAQ composite index is down only -1% today!

Pain! US Mortgage Rate Rises To 6.28%, Highest Since November 2008 As Raging Inflation Results In Fed Tightening

Raging US inflation is resulting in Federal Reserve monetary tightening, causing the 30-year US mortgage rate to hit it highest level since November 2008 (the beginning of Fed Quantitative Easing). Bankrate’s 30-year mortgage rate just hit 6.28%, the highest rate in 14 years.

The Biden Administration will be remembered for crippling inflation, the highest in 40 years AND the highest mortgage rate in 14 years.

And with Fed chatter about hiking rates, Dr T (me) predicts pain for the mortgage market.

Biden Administration Has Approved $4.8 Trillion of New Borrowing & Budget Deficit (Mocking Taxpayers Bird??)

The Biden Administration celebrated their irresponsible spending splurge on the White House lawn with boring singer James Taylor droning several tunes. But why is Biden celebrating driving up Federal debt by $4.8 TRILLION???

According to the Committee for a Responsible Budget (what a misnomer for insane-spending Congress and the Biden Administration), the Biden Administration has just approved $4.8 TRILLION in new Federal borrowing, leading to an increase in the budget deficit of another $4.8 TRILLION.

With a Democrat majority in The House, and VP Harris with the tie-breaker in the Senate, it is hardly surprising that Democrats have gone on a legendary spending spree which has helped drive inflation to 40 year highs.

Particularly since Fed monetary policy and “green” spending has resulted in a seismic shift in wealth towards the 1% under Obama and Biden.

Celebrate … making the 1% even wealthier. The “genius” of former Fed Chair and current Treasury Secretary Janet Yellen.

The Oakland Stroke? Oakland CA Leads Nation In Home Price DECLINE At -15.1% Over 3 Months (San Francisco DOWN -11.2% Over 3 Months As Fed Removes Punch Bowl)

Is the Oakland housing market having a stroke?

The US housing market is facing stress thanks to The Federal Reserve’s “war on inflation.” As The Fed starts trimming its excess ballast and M2 Money growth YoY slows to the lowest since Pre-Covid, we are seeing housing markets like San Francisco beginning to experience declines in home prices.

According to Redfin, Oakland California is leading the nation in terms of declining sales prices at -15.1% over a 3 month period. Followed by Silicon Valley and San Jose at -12.7%. San Francisco is in third place at -11.2% (I will ignore Lake Havasu AZ since it is teeny but does have one of the London Bridges) and Austin TX is in 5th place at -9.7%.

Powell and The Fed are doing “The Oakland Stroke.”