Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Well, U.S. and China reached an agreement to lower tariffs in a 90-day cool-off period. Despite China claiming they would NEVER agree to tariffs! The result? The NASDAQ 100 rose to its highest level since mid-February.
So much for the MSNBC/CNN doomsayers.
The delinquency rate on US commercial mortgage-backed securities (CMBS) for offices SURGED to 10.3% in April, near the highest EVER.
Moreover, the multifamily delinquency rate spiked 113bps in April, to 6.57%, the highest since 2015.
The Fed can help, but won’t. We are still struggling to recover from Biden’s cockeyed management of the economy,
Mortgage applications increased 11.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 2, 2025.
The Market Composite Index, a measure of mortgage loan application volume, increased 11.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 12 percent compared with the previous week. The seasonally adjusted Purchase Index increased 11 percent from one week earlier. The unadjusted Purchase Index increased 12 percent compared with the previous week and was 13 percent higher than the same week one year ago.
The Refinance Index increased 11 percent from the previous week and was 51 percent higher than the same week one year ago.
The economic news last week included a negative reading for first-quarter GDP growth and further signs of contraction in the manufacturing sector, mixed with a solid employment report for April. The net impact on mortgage rates was mostly downward but just back to levels from early April. The 30-year fixed rate declined to 6.84 percent.
But there will be no rate cuts today from The Fed.
Doge is necessary to get close to closing the budget gap (tax receipts – spending). Biden left Trump and the US with an untenable fiscal situation (think Cloward/Piven). Extremely large debt load with debt maturing over the next couple of years. Thanks to former Treasury Secretary Janet “The Snake” Yellen government funding formula using ST government debt. And its time to pay the piper to pay for Biden’s overspending and Yellen’s Treasury mismanagement.
Most of the Treasury debt that Treasury Secretary Bessent must refinance is short-term.
And with interest rates higher under Trump/Bessent than Biden/Yellen, US Interest Payments on Public Debt is expected to keep rising.
And US trade balance fell to -140.5.
So, were Biden’s economic policies (and Yellen’s Treasury mismanagement) an intentional Cloward-Piven strategy?
Here are Columbia sociologists Cloward and Piven attending a bill signing by President Bill Clinton.
Republicans are trying to lock in Trump’s tax cuts and Democrats are resisting. We now know that DOGE is trying to end the wasteful spending in DC. But I would really like to see tax rates on the middle class fall.
The wealth gap between the top 1% of taxpayers and the bottom 50% of taxpayers is enormous. And has gotten worse since 1990.
Meanwhile. to fight off the temporary effects of the tariff war, Trump is urging Fed Chair Powell to cut rates.
Powell will likely NOT cut rates. But what does “Lunatic Liz” Warren say about rate cuts??
DOGE is working: in Q1, US debt funding needs were $2BN less than the Treasury forecast in February, and in Q2 the Treasury is expected to need $53 billion less than it forecast 3 months ago.
The result?
The good news? The US Treasury 10Y-2Y yield curve is normalizing to January 2022 levels.
One the mortgage side, adjustable rate mortgage (ARM) share is the highest since the financial crisis (2008).
As Trump continues to stand up for Americans and China (and Democrats) continues to fight, the S&P 500 index lags MSCI World index by most since 1993 (The Clintons).
One can only hope!
The Emperor is actually China’s Xi Jinping! Causing the Empire Fed Manufacturing index to decline.
Despite the slump in ‘soft’ survey data, analysts expected Empire Fed Manufacturing to bounce back from March’s tumble to one year lows and they were right with the headline index rising from -20.0 to -8.1 (considerably better than the -13.5), but still negative. However, while current conditions jumped, expectations plunged to the lowest since 9/11/.
Obama/Biden/Harris/Schumer/Pelosi have let the US be the punks for China. Trump is simply trying to level the playing field and China’s Xie doesn’t like the new equilibrium.
VIX Index fell by 18.7 points yesterday … largest one-day decline in history.
The correlation between stock prices and bond yields has returned to positive territory — hinting at a period of distress in equities and a regime shift in equity and bond markets where recession fears, rather than inflation, may be starting to drive direction of both. The correlation between the two asset classes was positive for the better part of 20 years prior to the pandemic, suggesting equities trended in the direction of yields as inflation mostly coincided with growth. Stocks held a negative correlation to yields throughout most of the 1980s and 1990s, when inflation hurt stocks — and that phenomenon returned for the 2022-24 bear market and recovery period.
Notably, major stock corrections occurred each time the correlation jumped out of its primary regime.
China’s Xi flashes a Hitler salute!
Thunderstruck! The tariff kerfuffle between the Trump Administration and China is causing turbulence in the Treasury market. The 10-year Treasury rate is soaring with China’s counterpunching.
MBS spreads are widening.
Along with volatility.
But corporate spreads are widening more than MBS spreads.
The 10Y-2Y yield curve has risen to the highest level since the early days of “China Joe” Biden.
On a related note, Freddie Mac serious delinquency rates on mortgages is now the highest since the financial crisis.
Confounded Interest - Anthony B. Sanders 
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