Sundown? Volume of CMBS Delinquency Increased 49.4% During 10 Months Through October (Office Sector Delinquency Rate UP 261% Over 10 Months)

Is it sundown for the US commercial real estate market?

According to Trepp, the volume of CMBS delinquency increased 49.4% during 10 months through October.

Looking for more? This piece has been taken from Trepp and Commercial Real Estate Direct’s Q3 2023 Quarterly Data Review. Access the magazine here.

The volume of CMBS loans that are classified as delinquent increased by 49.4% during the 10 months through October to $27.91 billion. That volume amounts to 5.07% of the $601.98 billion universe tracked by Trepp. In contrast, delinquencies at the end of last year amounted to 3.03% of the $616.15 billion universe then extant.

Office Sector Drives Increase in Delinquency Volumes

The driver of the increase was the office sector, which had a 261% increase in delinquency volumes over the 10-month period through October. A total of 199 loans with a balance of $9.59 billion, or 5.91% of all CMBS office loans were at least 30 days late with their payments, as of the end of October. At the end of last year, 115 loans with a balance of $2.65 billion, or 1.63% of office loans, were delinquent.

The sector’s prospects are unlikely to improve as office occupancy rates have declined in most of the country’s major markets. That’s been driven by a substantial pullback in demand from office-using tenants.

Hit especially hard have been loans with floating coupons that are maturing and need interest-rate cap agreements in place before they qualify for term extensions. Those rate caps have skyrocketed in price in lockstep with interest rates.

On the residential side, The Fed is helping drive mortgage payments through the roof!

I wonder if Fed Chair Jerome Powell likes it like that!

Bloom Off The ESG Rose? WEF’s ESG Sustainability Push Is Waning (Issuance Of Sustainability Linked Loans Down 80% In US)

Huey Lewis and the News said it best about ESG goals: “The elites want a new drug.”

The World Economic Forum (WEF) is a leading pusher of the ESG drug, pushed by the elite class intending to control the world. Unfortunately, numerous American politicians and influencers have attended the Davos meetings and have openly praised the WEF and its leader Klaus Schwab.

ESG refers to the environmental, social and governance information about a firm. There is growing evidence that companies that take their environmental and social responsibilities seriously perform better financially. This has naturally made investors sit up and take notice.

ESG investing, or sustainable responsible investing (SRI), uses this information about a company to inform investment decisions that prioritize all stakeholders.

Here’s how the Forum’s partners are leading the switch to stakeholder capitalism.

There are 3 pillars to ESG and sustainable investment. This reminds me of the 10 pillars (or planks) of Marxism. So ESG is Marxism with a different name, but the end result is the same. Big government control.

But all is not well with WEF’s ESG drug distribution. In fact, ESG flows into socially consious funds were a big thing during Covid (2020) and the first year of Biden’s Reign of Error. But ESG flows slowed sharply in 2022 and seeing net outflows in 2023.

Issuance of sustainability linked loans is down 80% in the US.

US borrowers are retreating en masse from the world’s second-biggest ESG debt class.

The $1.5 trillion market for sustainability-linked loans, in which borrowing is tied to environmental, social or governance goals, has seen an overall slowdown in volumes this year as both interest rates and greenwashing fears rise. But nowhere has the decline been as precipitous as in the US, where the number of new sustainability-linked loans is down 80% from a year earlier.

But ESG is still relatively popular in Europe, Middle East and Africa (orange). But taste for ESG is waning around the globe. But the selection of Biden as President in the US marked a surge in ESG -tied loans in 2021 and 2022 (not to mention the insane levels of spending out of Biden and Congress, much tied to the sustainability, green energy fantasy.

Loans with terms tied to borrower’s ESG goals have fallen worldwide.

Several states (largely blue states like California, Minnesota, Illinois, and Colorado have pro-ESG laws) while several states have anti-ESG laws (largely red states like Montana, Idaho, North Dakota, Kansas, Utah, Indiana, Arkansas, Florida, and West Virginia).

And of course, global warning may not be as dire as John Kerry and Greta Thunberg say.

WEF’s Klaus Schwab about to get sniffed by his 80-year old puppet, Joe Biden. In fact, Biden is singing “I’m your puppet.”

Here is Hunter Biden welcoming the Green Energy fairy and all the trillions in misallocated spending it brings.

Wreck Of The USS 30Y Treasury! Disastrous 30Y Auction Sees Rising Long-term Treasury Yields

Today was the Wreck of the USS 30Y Treasury. Disastrous Federal fiscal policies and Yellen’s slowness to refinance outstanding Treasury debt has created a mess. Biden’s nerves must be a wreck with Powell and Yellen managing the nation’s finances.

That’s the only way one can describe today’s 30Y auction, which many expected could be challenging after a mediocre 3Y and a subpar 10Y auction earlier this year, but nobody expected… this.

The bond priced at a high yield of 4.769%, which was below last month’s 4.837%, and just shy of the April 2010 high. But more importantly, it tailed the When Issued by a whopping 5.3bps, which was… well… terrible, because as shown in the chart below, this was the biggest tail on record (going back to 2016).

The bid to cover was just as bad: at 2.236 it was the lowest since Dec 2021.

The internals were even worse as foreign bidders (Indirects) tumbled from 65.1% to 60.1%, the lowest since Nov 2021, and with Directs taking down only 15.2%, banks (Dealers) were forced to step up and take the balance, or a whopping 24.7%, double the recent average of 12.7%, and the highest since Nov 2021.

This is a big warning flag because every time we have seen a surge in Dealer takedowns, some sort of Fed intervention – QE or otherwise – has usually followed and we doubt this time will be different.

So what happened? Well, maybe the bond market read our note from earlier this week in which we explained “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation.” It may be difficult to fool the bond market for a second time.

The market reaction to the catastrophic 30Y auction was immediately, sparking a swift and painful response across markets with bonds and stocks hammered lower and the dollar spiking.

Treasury yields – as you would expect – exploded higher, with 30Y Yields back up to pre-payrolls levels…

That is the biggest spike in 30Y yields since March 2020…

But the entire curve is higher in yields…

Stocks tanked…

Regional bank stocks tumbled…

The dollar ripped back up to pre-payrolls levels…

Finally, we note that this ugly auction comes as Treasury Liquidity is evaporating dramatically…

The Fed (and The Treasury) have a problem!! Particularly since the 30Y yield reversed course and is on the rise again.

And at the 10 year tenor, the rate rose to 4.638%.

All together now!!

The Edmund Fitzgerald, symbolic of the US under Biden and Janet Yellen.

Addicted To Gov? US Added $600 Billion In Debt In One Month And $10.47 TRILLION Since Covid Outbreak, Credit Card APR Now 28.93% As Credit Card Debt Exceeds $1 TRILLION, Family Healthcare Costs Surge 7% To $24,000, Q3 Real GDP Rises 4.9%

Bidenomics new theme song is “Addicted To Gov.” Bidenomics needs lots of Federal spending and borrowing to survive. But all this spending and borrowing is causing rapid price increases and other distortions.

The US Federal government just added $600 billion in debt in ONE MONTH. And The Fed’s have borrowed $10.47 TRILLION since Covid in Q1 2020.

Meanwhile, retail credit card APR average just hit 28.93%! While credit card debt outstandnig just exceeded $1 trillion.

On the healthcare front, a family’s health insurance costs nearly $24,000 this year after the biggest increase in more than a decade.

.On the GDP front, Real gross domestic product (GDP) increased at an annual rate of 4.9 percent in the third quarter of 2023, according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.1 percent.

Here is the breakdown.

But inflation is reaacelerating, harming the middle class.

Real weekly earnings growth is falling again, down to 0.8% YoY.

And the US Dollar purchasing power keeps on falling. All together now!

Gavin Gruesom has a great smile like Joe Biden. Perhaps that is all you need to be a Democrat. President. Like Obama.

Dallas After (Economic) Midnight! Texas Manufacturing Survey Disappoints For 5th Straight Month Amid “Political Incompetence”(And Massive Corruption)

Dallas after (economic) midnight! Particularly after 5 consecutive months of negative readings.

For the fifth straight month, the Dallas Fed’s Texas Manufacturing Outlook survey disappointed expectations, printing -23.2 vs -21.8 exp) and is negative for a fifth straight month.

Source: Bloomberg

Texas factory activity declined in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell three points to -4.2, a reading indicative of a slight contraction in output.

Labor market measures suggest weaker employment growth and declining work hours. Price pressures evaporated, while wage pressures remained elevated…

Yes, the Biden Administration may be the most incompetent administration in US history with Congress a close second. And did I mention CORRUPT??

US Mortgage Rates UP 144% Under Biden’s Reign Of Error (Fed Likely To Pause Today But Raise Rates At July Meeting)

Biden’s “reign of error” is horrific. The inflation caused by Biden’s policies, The Federal Reserve and insane Federal spending has caused mortgage rates to soar 144% since Biden took office.

While The Fed is likely to pause today, but Fed Funds are pricing in a July rate hike.

Banks are not going to like another rate hike!!!

Markets Still Stressed Despite Fed Guarantees For Depositors (Volatility Spread In STRESSED Range)

Well, the banking fiasco CREATED BY THE FEDERAL RESERVE is still with us. Why? Because the FDIC guaranteed deposits above $250,000 for the first time in history, bailing out millionaires/billionaires. I call this Crony Socialism (but I repeat myself).

Congress doesn’t understand banking, only how to spend money.

Cryptos Rebound After Zhao Announces Plans An Industry Recovery Fund (Cronos UP 24% Overnight)

Major cryptocurrencies erased losses and turned higher after Binance Holdings Ltd.’s Chief Executive Officer Changpeng Zhao said the world’s largest digital-asset exchange plans to set up an industry recovery fund.

Zhao said Monday the goal was to “reduce further cascading negative effects” of the bankruptcy of rival exchange FTX, adding the fund will assist otherwise strong projects that are facing a liquidity squeeze.

So, cryptos are up today with Cronos up 24% overnight. Of course, Cronos is trading near zero, so any upturns in price register as large turns.

But across the board, cryptos are up. Of course, if Zhao changes his mind, look out.

I am waiting for the list of pension funds that invested in Sam Bankman-Fried’s schemes.

Let’s see if Alameda Research’s CEO Caroline Ellison faces any wrath from the DOJ or SEC. I doubt it.

How Biden And The Fed Defanged The FANG Index And Clobbered Growth And Real Estate ETFs (Cousin Eddie And Clark Griswold Strike Again!)

There is no doubt that Biden is the Cousin Eddie of politics with his gifts that keep on giving. Like rampant inflation, soaring food, gasoline and diesel prices, and Pelosi/Schumer’s helping hand in creating price controls that will kill potential cures for illnesses.

In addition to rampant 40-year highs in inflation, we have the Clark Griswold of the economy, Fed Chair Jerome Powell, slamming his foot on the economic breaks to combat inflation created by Biden’s energy mandates and reckless Federal spending (like the aforementioned, laughable “Inflation Reduction Act.”

So, Biden helps creates massive inflation and Powell and the Gang counterattacked by raising their target rate with more to come (at least until May 2023). And with the implied Fed Funds rate soaring (red line), we are seeing the FANG stocks (Facebook or Meta, Amazon, Netflix and Google) falling more rapidly (white line) than the S&P 500 index. Which is also falling like a rock (yellow line). All this is happening as M2 Money YoY crashes and burns.

How about growth versus value under Cousin Eddie and Clark Griswold? The Vanguard Growth ETF and Vanguard Real Estate ETF are plunging with Fed tightening (red line). Vanguard’s Value ETV (yellow line) is down too, but not by as much.

Yes, Washington DC elites. The gift that keeps on giving … bad things.

Thanks to my former GMU student Andrew Edwards for the Cousin Eddie suggestion!

Recession Warning? Total US Foreclosures Starts UP 440.91% YoY In June (Black Knight)

This bit of housing news won’t soothe the Biden Administration which is terrified of getting blamed for a recession.

Total US foreclosure starts are up 440.91% YoY in June, according to Black Knight.

Rising mortgage rates, declining REAL wage growth? This spells trouble in River City (Potomac River city, that is!)

Welcome to the Land of a Thousand home foreclosures!