Fed Raises Target Rate By 75 Basis Points To 1.75% Despite Negative Q2 GDP Forecast

Sometimes I wonder if The Federal Reserve Board of Governors pays attention to economic news. For example, the Atlanta Fed’s GDPNow forecast for Q2 was released today at -0.002%. So what does The Fed do? They raised their target rate by 75 basis points to 1.75%.

Apparently, The Fed has chosen to fight inflation rather than help the economy.

The Fed has chosen poorly.

US Real GDP Sinks To -0.002% As Fed Meets To Discuss Monetary Tightening (Declining Purchasing Power Of US Dollar)

While expected, it is still unwelcome news.

The Atlanta Fed’s GDPNow real-time GDP forecast for Q2 just sank into negative territory at -0.002%.

Let’s see how Real GDP does if The Fed actually withdraws its stimulus needle.

And consumer purchasing power keeps diving as The Fed keeps printing money.

Closing Hell! 10-year Treasury Yield Surges +11.3 Basis Points And Dow Drops -151 (Biden Never More Optimistic?)

I just read that President Biden has never been more optimistic about the US economy than he is now.

Well, today’s closing bell is not optimistic and is downright bearish.

The US Treasury 10-year yield rose … ANOTHER … 11.3 basis points as rumors circulate that The Fed might actually raise their target rate by 75 basis points.

And the venerable Dow (DJIA) is down -152 points today.

Markets are anticipating an increase of The Fed Funds target rate from 1% to 1.568%, less than the rumored 75 basis point increase being bandied about.

At least Columbus Ohio home prices are growing slower than the national average.

If Biden is wildly optimistic about the economy, then he needs to get out of The White House and talk to average Americans and not people like Robert De Niro.

We’re Goin’ Down! Treasury Curves Goes Negative As Mortgage Rates Hit 5.87% As Fed Tightens Its Choke Hold

We’ve goin’ down!

The US Treasury 10Y-5Y yield curve has gone into negative territory (which usually occurs before a recession). At the same time, US mortgage rates are climbing like Tom Cruise in “Top Gun: Maverick” to 5.87% as The Fed tightens its choke hold on markets.

The 10Y-5Y Treasury curve typically goes negative before a recession.

And then we have today’s PPI report (Producer Price Index), rising 10.8% YoY as M2 Money stock starts to decline a bit.

Here is a better view of mortgage rates under Biden/Powell.

I hate this chart from John Burns.

Biden/Powell/Pelosi/Schumer are collectively “Mr Freeze.”

Closing Hell! NASDAQ Tanks -4.58%, 10Y Treasury Yield Spikes +22 Basis Points, 10Y-2Y Yield Curve Flattens To Near Zero (MBS Prices Pull A Titanic)

Not nibbling on baby formula, watching the sun bake, all those people paying $5 per gallon for gas. Wasting away again in Biden/Powellville.

It was closing hell for a terrible day in markets as investors struggle to process the dreadful and seemingly endless inflation report on Friday.

What happened today? The NASDAQ tanked -4.58% and the 10-year Treasury yield jumped 22.2 basis points. Gulp.

The 22.2 bps jump in the 10-year Treasury yield has led to Agency MBS prices pulling a Titanic and sank.

Somehow, I don’t think that Biden and Congress are going to help the middle class and low-wage workers.

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.”

Black Monday! 10Y Treasury UP 11 BPS, S&P 500 E-Mini DOWN -2.5% (Mortgage Rate Rises To 5.78%, Bitcoin Keeps Dropping)

Black Monday!

Off to bad start this week. The 10-year Treasury yield rose 11 basis points at 8am EST while the S&P 500 E-mini futures are down -2.5%.

And then we have this scary chart of mortgage rates. Bankrate’s 30-year mortgage rate is now up to 5.78%.

And then we have Bitcoin. Bitcoin is struggling as The Fed tightens the noose on the US economy with expected Fed rate hikes and a rising US Dollar.

I’ve got a whole lotta anxiety over this week.

The dynamic duo.

Alarm! Nasty Inflation Report Leads To No-bid For MBS (Duration Risk Has Extended To 7 From <1 On August 2, 2021 With Rising Inflation)

Alarm!

The CPI news on Friday was so awful that it changed the bond market’s view of Fed trajectory, and the weakest sector broke. In bond jargon, MBS went “no-bid.” No buyers for MBS. Then a few posted prices beyond borrower demand, not wanting to buy except at penalty prices. (Courtesy of Cherry Creek Mortgage)

Despite what Treasury Secretary Janet Yellen has said, Friday’s inflation report demonstrated that inflation is no longer transitory. And with that realization, there was a dearth of bidders for Agency Mortgage-backed Securities (Agency MBS) on Friday.

As a result, agency MBS 2.5% dropped to under $90 as markets expect The Fed to keep raising rates to combat inflation.

Duration of the FNCL 2.5% agency MBS has been extending with growing inflation. Duration was under 1 on August 2, 2021 but is now 7 times greater at almost 7.

Note to Yellen: inflation seems be permanent, not transitory. Or at least inflation will remain high for the foreseeable future, crushing the life out of Agency MBS.

Weekend Update! US Gasoline Tops $5 (Highest In History), 2Y Treasury Yields Soaring, Mortgage Rates Highest Since 2008 (Inflation Tax Costing Households $5,200 More YoY)

Up, up and away in our inflationary balloon!

Regular gasoline prices have breached the $5 a gallon barrier, the highest in recorded history. And it is even worse in states like California where regular gas prices have been above $7 per gallon.

Bankrate’s 30-year mortgage rate is now 5.78%, the highest since 2008. And rising really fast as The Fed tightens the monetary noose.

Speaking of noose tightening, the 2-year US Treasury Note yield is rising awfully fast.

The US Treasury 10Y-2Y curve slope just flattened to 8.819 bps and challenging the 0% grade awfully fast.

The US Dollar is soaring as US inflation soars, consumer purchasing power (green line) collapses along with M2 Money Velocity.

There is little doubt that soaring inflation, gasoline and food prices have hurt Biden’s popularity as well as the Democrats popularity ahead of the upcoming mid-year elections. People for the most part vote with their wallets.

According to estimates by Bloomberg Economics, US households will spend $5,200 more this year than they did last year on the same consumption basket.

That breaks down to $433 extra in expenditures every single month. That is what is called “the inflation tax.” And it hurts.

Call this The Inflation Tax Blues.

UMich Buying Condition Plunges To 43, Lowest Since 1982 As Fed Goes Crazy (Consumer Sentiment Drops To Lowest Level EVER)

The Federal Reserve is going crazy on inflation news!

The Fed is expected to raise their target rate to 2.875% by February 2023. With that expectation, mortgage rates (yellow line) are soaring. And with that, University of Michigan’s Buying Conditions for housing has plunged to 43, the lowest levels since 1982 as the US was trying to recover from high inflation.