Great Reset?? US Treasury 10yr Yield Tanks -20 Basis Points (UK 10yr Tanks -24.1 BPS)

As I frequently told my investment and fixed-income securities students at Chicago, Ohio State and George Mason University, any 10 basis point change in the US Treasury 10-year yield is significant.

But how about today’s 20 basis point decline in the US Treasury 10-year yield?

The UK’s 10-year yield is down even more at -24.1 basis points. Germany is down -18 bps and France is down -10.3 bps.

Speaking of credit default swaps, Credit Suisse is back to financial crisis levels while UBS and Deutsche Bank are not … yet.

And gold jumped $28.5 dollars today as POP goes the yield.

With all the turbulence in markets thanks to the war in Ukraine and Biden’s green energy mandates and spending (not to mention Statists like Klaus Schwab screaming about a Great Reset), I was reminiscing about more simple times.

Lehman Debacle 2? Credit Suisse Market Turmoil Deepens After CEO Memo Backfires (Credit Suisse’s CDS Now Higher Than During 2008-2009 Financial Crisis)

  • New CEO Koerner sought to reassure employees in Friday memo
  • Shares fall to a fresh record low, gauge of credit risk rises

It is like the Lehman Brothers debacle in 2008 all over again.

(Bloomberg) — Credit Suisse Group AG was plunged into fresh market turmoil after Chief Executive Officer Ulrich Koerner’s attempts to reassure employees and investors backfired, adding to uncertainty surrounding the bank.

The stock, which had already more than halved this year before Monday’s sell-off, fell as much as 12% in Zurich trading to a record low that values the firm at less than $10 billion. That was accompanied by a spike in the cost to insure the bank’s debt against default, which jumped to its highest ever.

Koerner, for the second time in as many weeks, had sought to calm employees and the markets with a memo late Friday stressing the bank’s liquidity and capital strength. Instead, it focused attention on the dramatic recent moves in the firm’s stock price and credit spreads, and investors rushed for the exit when trading reopened after the weekend.

One notable difference between 2008 and today is that Credit Suisse’s equity was flying high in June 2007 then crashed a the global banking crisis went into full motion. We then saw Credit Suisse’s credit default swaps soar in early 2009. But today Credit Suisse’s equity is a pale imitation of its former self, but its credit default swap is now higher than it was at its peak in early 2009.

Credit Suisse is now trading lower than its European rival Deutsche Bank (aka, The Teutonic Titanic).

Yes, this brings back sickening memories of the 2008-2009 global financial crisis. Let’s see how The Federal Reserve, ECB and Bank of Switzerland handle this debacle, particularly with M2 Money growth so low.

It appears that we are in another Lehman debacle. Or should I say “Lemur Bros.”

NASAQ Index Plunges 4% On Fed’s Inability To Cool Inflation (Gimme Some Quantitative Tightening!)

That’s the way The Fed likes it!

On today’s inflation report for August, it is clear that The Fed has failed to cool off US inflation, meaning that MOAR QT is on the way.

The NASDAQ composite index plunged -3.85% after The Fed’s failure was released.

The Dow was down “just” -2.70% today. But things are red all over in Europe where they too are failing to tame inflation.

The Fed is probably singing “Give me some quantitative tightening!”

The likelihood of further rate increases just rose to over 4% for the December FOMC meeting.

Jay and The Statists At The Fed!

Pain is coming!

Behind The Curve! US Headline Inflation 8.5% Is Far Ahead Of Fed Target Rate 2.5% (Eurozone Is In Similar Situation 9.1% Inflation Versus 0.75% Deposit Rate)

The Federal government reaction to the Covid outbreak in early 2020 included massive monetary stimulus, Federal government spendathons and Biden’s green energy policies have resulted in a sizzling 8.5% inflation rate (update on Monday morning).

The problem is that The Federal Reserve is far behind the inflation curve with their target rate at only 2.5%. And The Fed’s balance sheet remains near $9 TRILLION in assets held.

In Euroland, we are seeing a similar problem (Frankfurt, we have a problem!). The Eurozone inflation rate is at 9.1% while their version of The Fed Funds Target rate is only 0.75%, a large catch-up gap.

If we look at the Taylor Rule for the US using headline inflation, we see that The Fed needs to raise their target rate to … 21.72% to crush inflation.

In Euroland, the problem is similar. At 9.10% inflation, the ECB will have to raise their version of The Fed’s target rate to 16.80% to combat inflation. As if that will happen in either the US or Euroland.

On a different note, is it my imagination or does US Democrat Senate candidate from Pennsylvania John Fetterman look like the alien from the flick “Battleship”?

Fetterman is the top picture.

Here is a video of the Fetterman/Dr. Oz debate … if it ever occurs.

US Mortgage Rate Rises Above 6% As Fed Slow To Withdraw Stimulus (Drives Me Crazy!)

The Federal Reserve drives me crazy!

Thanks to Federal Reserve increases in their target rate, the 30-year mortgage rate has risen above 6%.

What drives me crazy about The Fed is their failure to removed monetary stimulus following the financial crisis of 2008 when they dropped their target rate to 25 basis points (0.25%) and began assets purchases (orange line). The Fed raises their target rate only once during Obama’s Presidency but then raised rates 8 times after Trump was elected President.

Now we are seeing The Fed NOT shrinking their balance sheet in a meaningful way. However M2 Money growth YoY (green line) has slowed to 5.2%.

While it is a good thing that The Fed is FINALLY reducing some of the monetary stimulus in place since 2008, the bad thing is that mortgage rates are rising rapidly.

The Fed’s quantheads are predicted to resume easing in March 2023.

US Treasury Yields And Mortgage Rates Rise As Fed Vows To Extinguish Inflation Fire (Caused By Themselves And BAD Federal Policies) Check Out The Eurozone

As inflation burns the US middle class and low wage workers, The Federal Reserve reaffirmed at Jackson Hole that they are the NEW Smoky The Bear (only The Fed can fight inflation fire!) But of course, Federal spending and energy policies can drive up prices too.

Having said that, the 2-year Treasury yield and 30yr mortgage rate are rising rapidly.

The Fed is trying to cool demand by raising rates after lax monetary policy since late 2008.

While the US 2-year Treasury yield is up only slightly today, the Eurozone is seeing their 2-year sovereign yields spiking by 11-15+%.

Fed Fireball? US PPI Final Demand UP +11.3% YoY As Fed May Raise Rates 100 Basis Points At July 27th FOMC Meeting (Stocks In A Sea of Red)

Face it. The Biden Administration has little interest in trying to increase the supply fossil fuel energy which would anger his “green” base (like building more refineries or allowing for more crude oil and natural gas exploration). So, the burden of “inflation fighting” falls on the frail shoulders of The Federal Reserve.

Given today’s US Producer Price Index Final Demand prices rising +11.3% YoY in June, it seems that The Fed has not been able to extinguish the “Tower of Inflation.” But, Fed Funds Futures are pointing to a near 100 basis point (or 1%) increase in The Fed Funds target rate at the July 27th Fed Open Market Committee (FOMC) meeting.

The Fed Funds Futures Data points to a +0.920 (almost 1%) increase at the July 27th FOMC meeting. Followed by rate cuts.

And with the fear of a near 100 basis point increase, today’s stock markets are a sea of red.

It is up to Fed Chair Jerome Powell and policy error brigade to extinguish price increases caused by 1) bad Biden energy policies and 2) too much spending by Biden and Congress. It is like trying to wave-down the Super Chief train with a cigarette lighter.

Yet, the Frail Fed will try to waive down The Super Chief inflation engine with Fed Fireballs. Aka, rate increases of 100 basis points.

Update! Dow down over 500 points this AM.

Bidenflation Strikes! Dow Down 2% As Recession Fears Grow (Check Out M1 Money Growth!)

Lightning strikes!

Inflation has been a disaster for millions of Americans. As inflation grows (highest in 40 years), fears of recession are jolting markets.

The Dow today is down 2%.

Then again, Europe is down even more.

My favorite chart for explaining the surge in inflation is M1 Money Stock around the Covid outbreak in early 2020. Which has NOT been removed.

The US Treasury 10Y-2Y yield curve just inverted.

No, this is not a real ECB currency, but it might as well be.

Blitzkrieg Bop! ECB to Activate First Line of Defense in Bond Market July 1 (Lagarde Calls For Monetary Maginot Line) WIRP Forecasts US Rate Hikes Until March 2023, Then Declining Rates

The ECB is planning on a Blitzkrieg Bop, monetary style.

When Lagarde talks about the first line of defense, all I can picture is The Maginot Line in France, a failed defensive line that was easily bypassed by the German Wehrmacht (army).

The European Central Bank will activate the bond-purchasing firepower it’s earmarked as a first line of defense against a possible debt-market crisis on Friday, according to President Christine Lagarde.

Applying “flexibility” to how reinvestments from the ECB’s 1.7 trillion-euro ($1.8 trillion) pandemic bond-buying portfolio are allocated is aimed at curbing unwarranted turmoil in government bonds as interest rates are lifted from record lows to curb unprecedented inflation.

Net buying under a separate asset-purchase program is also set to end on Friday.

In other words, Euro-area inflation has exploded in 2021, just like the USA.

But the US also has an inflation problem caused in part by Covid and the government’s reaction to Covid: economic shutdown and massive Federal monetary and fiscal stimulus. The stimulus is still in play.

The bond market is already anticipating an about-face by The Federal Reserve (implied overnight rate peaking at the March 2023 FOMC meeting, then receding.

Again, nothing has been the same since the Covid outbreak of 2020 and Fed monetary blitz. Here is the US Dollar Swaps curve before Covid (yellow line) and today’s Fed-enhanced curve (green).

Mortgage rates in the US have climbed to 6% then backed-off slightly. The good ole Back-off Boogaloo as The Fed attempts to unwind its monetary stimulypto.

The French Maginot Line, easily bypassed by German tanks. The Federal Reserve is the US’s Maginot Line. The Yellenot Line??

Opening Hell! Markets In Sea Of Red Thanks To Global Slowdown And Fed Signals Of Tightening (Global Markets In Sea Of Red)

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.”