Fire! European Stock Valuations Lowest Since 2012 On Strong King Dollar, Atlanta Fed GDPNow Q3 Drops To 0.271% (Bostic Calls For 1.25 MORE Rate Increase)

Fire! European stock valuations have dropped to lowest since 2012.

The US Dollar index is soaring (not helping Europe) as The Federal Reserve tightens monetary policy to combat the inflation fire.

Meanwhile, the Atlanta Fed’s GDPNow real-time forecast for Q3 is at least above zero (barely) at 0.271%.

Fed officials continued to hammer home the central bank’s hawkish outlook, with Atlanta President Raphael Bostic saying he backs raising rates by a further 1.25 percentage points by the end of this year. Meanwhile, the People’s Bank of China said it will accelerate usage of targeted loans.

Bond volatility is increasing.

The US Treasury 10-year yield was down -20 basis points yesterday and is up +10 basis points today. This is the Fed’s Rollercoaster effect.

The Dow is down another 400 points today as The Fed’s Sugar Rush is ending. Perhaps The Federal Reserve main building in Washington DC should be renamed “The Sugar Shack.”

In related news, apparently the Biden Administration is going to replace Treasury Secretary Janet Yellen with … anybody else??

Meanwhile I will have a bottle of wine to kill the pain of inflation and Fed tightening.

When Temporary Seems Permanent: Overnight Repos Hit All-time High, $2.366 TRILLION (MOVE Bond Volatility Index Near Covid Recession High)

When temporary seems permanent?

Banks get to park money at The Federal Reserve overnight in the form of repurchase agreements (or repos). But as inflation is raging in the US, banks have parked a record $2.366 TRILLION at The Federal Reserve.

The MOVE bond volatility index keeps rising as inflation roars and The Fed fights back,

The US bond volatility index is now almost as high as during the Covid Crisis and approaching financial crisis levels.

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?

Flight To Safety! US 10yr Treasury Yield FALLS -12.2 BPS, UK 10yr Yield FALLS -46.6% BPS (UK Natural Gas Futures UP 16.37%)

It is going to be a bad day in markets. As I often mentioned in my classes, any 10 basis point shift in Treasury yields is a big deal.

On the bond side, the US Treasury 10-yr yield fell -12.2 basis points as investors run for cover. The UK 10 yr yield fell -46.6 basis points.

On the commodity side, we see WTI crude up 1.12%, heating oil up 1.92% and … UK Natural Gas Futures up 16.37%.

The natural gas leak in the Baltic Sea might have something to do with global jitters.

Here is a map of the gas leak.

I will have to turn on “The View” to find out who sabotaged the natural gas pipeline. /sarc

No, I don’t think Biden yelling at gasoline companies to lower prices has anything to do with market turmoil today. Its just another day under Joe Biden.

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.

US Mortgage Payments Up 45.5% YoY Thanks To Fed Tightening Caused By Bidenflation

Biden’s green energy policies (limiting supply) caused a tremendous surge in energy prices and food prices (one has to pay to get food shipped!). But in order for The Fed to cool inflation, they are in the process of tightening their loose monetary policy since late 2008.

One of the consequences (intended or unintended) is that as mortgage rose, homebuyer mortgage payments rose 45.5% YoY.

US Treasury Yield Curve Inverts Most Since 1982 And Fed Chair Volcker (S&P 500 Declines -1.8% On Fed Announcement)

Well, ain’t this a kick in the head!

The US Treasury yield curve inverted by the most since 1982 and Fed Chair Paul Volcker. Of course, inverted yield curves occurs before recessions.

Then we have the S&P 500 index dropping -1.8% today.

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.