UMich Buying Conditions For Houses Remain Depressed As Fed Tightens (Fed’s Brainard Calls For Fed To Keep Tightening!)

Bidenflation and The Fed’s counter-attack has caused considerable damage to the housing and mortgage markets.

Today, the University of Michigan consumer sentiment indices were released for September. Of note, buying conditions for houses remained in the tank.

Meanwhile, Fed Vice Chair Lael “Brainless” Brainard is calling for The Fed to NOT stop tightening money and raising interest rates.

As The Fed tightens, the entire range of Agency MBS TBA (to be announced) are under $100.

For example, the FNCL 2.5% TBA is now 84-17. And falling like a paralyzed falcon.

Here is Brainard with Fed Chair Jerome “Foul Owl” Powell, the dynamic duo of crashing markets.

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.

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.

Lifeforce? US Debt Load At 123% Of GDP As M2 Money Velocity Nears All-time Low (Will The Fed Sound The Alarm?)

The Federal Reserve’s Open Market Committee (FOMC) will announce their latest round of rate increases on Wednesday, September 21st, at 2pm EST. Will the members of the FOMC discuss the fact that the US debt load is now at a whopping 123% of GDP?? Or will the FOMC only discuss inflation in its deliberations?

The Fed is expected to raise the upper-bound of their target rate to 3.25%, a 75 basis point increase in a futile attempt to cool inflation. Yet the rampant spending by Biden, Pelosi and Schumer (3 of the 4 Horsemen of the Economic Apocalypse) has raised the Federal Debt to GDP ratio to 123%. Even more disturbing, M2 Money Velocity (GDP/M2 Money) is near the all-time low. Meaning that rampant Federal spending is doing little to increase GDP.

Now for the worse news! Federal debt held by the public is expected to rise to 185% of GDP in 2052.

I feel like I am watching the movie “Lifeforce” where The Fed tries to breath life into an economy without killing it.

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.

Pain! US Mortgage Rate Rises To 6.28%, Highest Since November 2008 As Raging Inflation Results In Fed Tightening

Raging US inflation is resulting in Federal Reserve monetary tightening, causing the 30-year US mortgage rate to hit it highest level since November 2008 (the beginning of Fed Quantitative Easing). Bankrate’s 30-year mortgage rate just hit 6.28%, the highest rate in 14 years.

The Biden Administration will be remembered for crippling inflation, the highest in 40 years AND the highest mortgage rate in 14 years.

And with Fed chatter about hiking rates, Dr T (me) predicts pain for the mortgage market.

Sundown? Freddie Mac 30Y Mortgage Rate Highest Since Financial Crisis And Advent Of Fed Quantitative Easing (CORE US Inflation For August Expected To Rise To 6.1% YoY)

Is it sundown for housing and mortgage markets with Fed quantitative tightening (QT)?

Freddie Mac’s 30-year mortgage commitment rate just rose to its highest level since … The Fed initiated Quantitative Easing (aka, fanatical money printing) during the financial crisis.

The good news? The US inflation report is likely to show a slowing of the inflation rate to around 8% YoY and -0.1% MoM. Why? Gasoline prices are cooling thanks to the global economic slowdown.

While gasoline and food prices are falling, CORE US inflation, the inflation rate excluding food and energy, is expected to rise to around 6.1% YoY and +0.30% for August.

But watch out as winter approaches!

US Treasury Yields And Mortgage Rates Rise As Fed Vows To Extinguish Inflation Fire (Caused By Themselves And BAD Federal Policies) Check Out The Eurozone

As inflation burns the US middle class and low wage workers, The Federal Reserve reaffirmed at Jackson Hole that they are the NEW Smoky The Bear (only The Fed can fight inflation fire!) But of course, Federal spending and energy policies can drive up prices too.

Having said that, the 2-year Treasury yield and 30yr mortgage rate are rising rapidly.

The Fed is trying to cool demand by raising rates after lax monetary policy since late 2008.

While the US 2-year Treasury yield is up only slightly today, the Eurozone is seeing their 2-year sovereign yields spiking by 11-15+%.

M2 Money Growth Slows Further As Assets (Bitcoin, Home Prices) Fall With Slower Growth (Biden Helps Drive College Tuition Even Higher With Student Loan Forgiveness)

Biden is the opposite of the miserly Scrooge McDuck. He gives billions to Ukraine and spends trillions on various Federal projects without batting an eye as to how and who is going to pay for all the spending. And Biden’s latest election pandering is no different.

Speaker Pelosi claims that Biden’s bold action on student loan forgiveness is a strong step in Democrats’ fight to … make college even MORE expensive and lead to colleges hiring even MORE administrators (aka, apparatchiks) making colleges even MORE bogged-down in red tape.

And Speaker Pelosi, the costs of Biden’s midterm election buy of votes is estimated to be $300 BILLION. And a report from the Brookings Institution observed that one-third of student debt is owed by the wealthiest 20% of households, while only 8% is owned by the bottom 20%.

So, Biden is letting AOC write-off $10k of her student loan obligation. Bear in mind that the $10k forgiveness is taxed by The Federal government as income.

It looks like The Fed will have to expand the M2 Money supply to pay for “Billions Biden’s” spending spree.

I wish Biden, Pelosi and Schumer were more like Dwight Schrute from Dunder-Mifflin.