Perhaps Joe Biden and Fed Chair Jay Powell are channeling Dean Martin by letting us have it.
Since Obama’s 3rd term as President (aka, Biden’s installation as President on January 20, 2021), mortgage rates have risen 87%, regular gasoline prices have risen 80%, CRB foodstuffs are up 59% and Commodities are up 63%.
And don’t forget about America’s energy life force, WTI Crude Oil. It is UP 123% under Biden.
The Biden Administration and The Federal Reserve together should be called “The Cooler Kings” in that their policies are putting a Big Chill on the mortgage market and equities.
Mortgage rates are skyrocketing thanks to the Federal Reserve.
The 30-year fixed-rate mortgage averaged 5.27% for the week ending May 5, according to data released by Freddie Mac FMCC, -1.62% on Thursday. That’s up 17 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%.
House price growth to wage growth is below the all-time high, but remains above housing bubble levels of 2005-2007.
The Refinitiv Venture Capital Index is down 53% since November ’21 as The Fed cranks up interest rates.
Well, at least commodities are soaring under “The Cooler Kings.” Pretty much everything else is sucking wind.
Here’s some simple Medusa math for you: negative growth + payroll gains = negative productivity. Negative productivity + high labor costs = very high unit labor costs. That’s not a pretty picture for the economy or for companies, and the Q1 figures were even worse than expected — productivity fell by 7.5%, pushing unit labor costs up by 11.6%. Nasty.
In fact, labor productivity fell to the lowest level since 1947 and President Harry Truman.
Of course, Biden’s green energy policies have led to crushing inflation.
So, after Fed Chair Powell (aka, Jay The Revelator) said yesterday that “No Signs US Economy ‘Vulnerable’ To Recession”, we saw the S&P 500 index dive 1.5% and the 10-year Treasury yield break through the 3% barrier.
Biden’s policies are a Medusa-touch on the economy.
Well, the Fed’s talking heads have been saying a 50 basis point hike was coming in May … and it appeared!
And it looks like 9 rate hikes are a comin’ by February 2023.
The Fed’s Dot Plots shows a cooling of Fed rate hikes by 2024 and beyond.
Here is the path of Balance Sheet peel-off.
The US Treasury actives curve is up by 14 bps at the 10-year tenor and up 17 bps at the 2-year tenor.
The plan will see $30 billion of Treasuries and $17.5 billion on mortgage-backed securities roll off. After three months, the cap for Treasuries will increase to $60 billion and $35 billion for mortgages.
I could read the Fed’s speech on their decision, but since The Fed has been so highly politicized, I don’t really care what they say. Only what they do.
Simply unaffordable! US housing, that is. As The Federal Reserve tries to fight inflation caused by Biden’s Medusa-like policies, mortgage rates are soaring and we are seeing an INCREASE in mortgage purchase applications ahead of Fed tightening. Panic in (Fed) Needle Park!
Mortgage applications increased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 29, 2022. The Refinance Index increased 0.2 percent from the previous week and was 71 percent lower than the same week one year ago.
The seasonally adjusted Purchase Index increased 4 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was11 percent lower than the same week one year ago.
Adjustable rate mortgage (ARM) share has risen to 9.3% along with mortgage rates.
Between Biden’s energy policies, Congressional Covid relief and seemingly perpetual monetary stimulus from The Fed, we have 20% growth in home prices despite mortgage rates soaring.
And as The Fed is expected to tighten, mortgage rates hit 5.50%.
The U.S. Treasury market is showing signs of stress that may have implications for whether the curve keeps steepening.
Over the past month the curve has retraced from an inversion to a steepening driven by a surge in yields on benchmark 10-year bonds. That has led to interesting outlier indications, as traders weigh the outlook for Federal Reserve interest rate increases and inflation.
The US Treasury yield curve has settled-in at 20.383 bps (effectively zero) as The Fed continues its war on inflation.
On the SOFR front, we see SOFR Coupons being slow to benefits from Fed rate hikes. So, SOFR Coupons are behaving like Stouffer’s lasagna, frozen and tasteless.
On the other hand, mortgage rates continue to soar on EXPECTATIONS of Fed rate hikes.
Phoenix AZ leads the top ten at 30.4% with Washington DC lagging at 9.9%.
So, its official. The Federal Reserve is best exemplified by former Yankee/Mets first baseman “Marvelous” Marv Throneberry. When players presented Mets’ manager Casey Stengel with a birthday cake but neglected to give piece of cake to Throneberry, Stengel replied to Throneberry when asked why no cake, “Because I was afraid your were going to drop it.”
Just like The Federal Reserve, the honorary Marv Throneberry of the the global economy.