Chain Gang! US Mortgage Rates Rise for Seventh Week to Highest in 16 Years (Basic Mortgage Applications Fall To May 1997 Levels, Refi Apps DOWN 86% YoY, Purchase Apps DOWN 37% YoY)

In addition to creating the highest inflation rate in 40 years, we are now seeing the highest mortgage rate in 16 years. I feel like we are all on a chain gang.

(Bloomberg) — US mortgage rates jumped to a 16-year high of 6.75%, marking the seventh-straight weekly increase and spurring the worst slump in home loan applications since the depths of the pandemic.

In fact, mortgage application just fell to the lowest level since May 1997.

The contract rate on a 30-year fixed mortgage rose nearly a quarter percentage point in the last week of September, according to Mortgage Bankers Association data released Wednesday. The steady string of increases in mortgage rates resulted in a more than 14% slump last week in applications to purchase or refinance a home.

Over the past seven weeks, mortgage rates have soared 1.30 percentage points, the largest surge over a comparable period since 2003 and illustrating the abrupt upswing in borrowing costs as the Federal Reserve intensifies its inflation fight. 

The effective 30-year fixed rate, which includes the effects of compounding, topped 7% in the period ended Sept. 30, also the highest since 2006.

The Refinance Index decreased 18 percent from the previous week and was 86 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 13 percent from one week earlier. The unadjusted Purchase Index decreased 13 percent compared with the previous week and was 37 percent lower than the same week one year ago.

Here is today’s table of MBA mortgage applications and its ugly.

Meanwhile, the politicians in Washington DC are twisting the night away while the rest of the nation suffers.

Unfortunately for the US chain gang, gasoline prices are rising again as the US drains its petroleum reserve. Because, that’s the way … uh-huh … they like.

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.

Wipe Out! $32 TRILLION In Stock Value Wiped Out (US Core Deflator Rises To 4.9% Prompting Taylor Rule Fed Target Rate Of 9.65%, We Are Currently At 3.25%)

Wipe out!

$32 TRILLION of global stock value has been wiped out since December 2021.

Today’s core PCE deflator reading of 4.9% YoY shows that the inflation surge is not over. With a core PCE deflator of 4.9%, the Taylor Rule suggests that The Fed Funds Target Rate should be at 9.65%, far below its current level of 3.25%. So, IFF The Fed is following any sort of rule, rates should continue to soar.

And if we use headline inflation of 8.30% YoY, the Taylor Rule suggests hiking the target rate to 14.75%.

After yesterday’s dismal Q2 report of -0.6%, I fully anticipate a recession. Ain’t this a kick in the … head.

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.

Goodnight Irene! 2yr US Treasury Rate Rise Over 4%, Mortgage Rates At 6.55% (UP 116.2% Since Last Year)

Goodnight Irene!

Rampant inflation is really hurting American households (even Fed Chair Powell admitted as much yesterday), but because of inflation, The Fed’s counter-punch has resulted in 1) declining equity prices, declining bond prices and increase mortgage rates. In fact, over the past 12 months, the 2-year US Treasury yield is up over 15 times (0.262% to 4.226%), Bankrate’s 30-year mortgage survey rate up 116.2%.

The S&P 500 index has been generally falling as The Fed tightens their monetary policy.

Another day, another bad day on Wall Street. The NASDAQ is down 2%.

And here is a chart from Redfin. Luxury home sales sink most on record.

Powell’s Famous Chili! National Association of Home Builders Market Index Falls More Than Expected To 46 As Fed Tightens Monetary Noose (Lowest Since 2012, Excluding Covid Crash)

The National Association of Home Builders market index fell more than expected in September to 46, the lowest reading since 2012 (if I exclude the Covid economic shutdown).

Note that the NAHB market index is declining along with at the increase in the 30yr mortgage rate.

Fed Tilts Toward Third 75 Basis-Point Hike on Stubborn Inflation (Fed’s Target Rate Expected To Hit 4.395% By March ’23 Then Fall, Mortgage Rates Rising)

Inflation is stubborn because “goin’ green!” by 1) restricting US fossil fuel production and exploration and 2) Biden/Congress endless spending splurge since Covid. So, The Federal Reserve has a tough problem: cooling inflation while US energy prices are up 54% under Biden. And those higher energy prices have percolated through the entire economy in terms of food prices and heating prices.

Where do we sit? The US Treasury 10yr-2yr yield curve remains inverted (a sign of impending recession). Mortgage rates are the highest in 14 years as The Fed tightens.

If we look at Fed Funds Futures data, we can see that traders expect The Fed’s target rate to rise to 4.395% by March 2023’s FOMC meeting. Then traders expect The Fed to take their enormous foot off the tightening pedal.

Yes, inflation is crushing the middle class and low-wage workers. Average hourly earnings YoY after we subtract inflation are negative.

Taylor Rule? Currently, the Taylor Rule based on Core inflation of 4.56% YoY suggests a Fed target rate of 9.14%. Since traders anticipate the target rate to peak at 4.395%, The Fed will almost be halfway towards cooling inflation.

The problem is … Fed Chair Powell and Treasury Secretary Yellen don’t like rules limiting their “power.” Powell and Yellen think the Taylor Rule is a New Jersey ham product.

US Mortgage Applications Fall To Lowest Level Since 1997 As Fed Tightens The Monetary Noose (Purchase Apps DOWN -29% YoY, Refi Apps DOWN -83% YoY)

US mortgage applications dropped to the lowest level since 1997. I wonder if President Biden will invite boring crooner James Taylor back to the White House to sing about the collapsing mortgage market? Perhaps he can sing “Shower The People” and change the lyrics to “Shower ON The People.”

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 9, 2022. This week’s results include an adjustment for the observance of Labor Day.

The Refinance Index decreased 4 percent from the previous week and was 83 percent lower than the same week one year ago.
The seasonally adjusted Purchase Index increased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 12 percent compared with the previous week and was 29 percent lower than the same week one year ago.

The Bankrate 30-year mortgage rate is now at the highest level since 2008 at the advent of Fed’s QE.

Yes, The Fed has been slow as a sloth in shrinking its balance sheet.