The delinquency rate on commercial mortgage-backed securities (CMBS) for offices spiked to 8.1% in July, the highest in 11 years.
The delinquency rate of office CMBS loans has QUADRUPLED in 1.5 years.
Delinquencies are currently rising at a faster pace than during the 2008 Financial Crisis. A top AAA-rated CMBS experienced a $40 million loss in May for the first time since the 2008 Financial Crisis.
While not an office, Edward Hopper painted some great real estate properties!
Kamala Harris, despite being VP for almost 4 years, is going to annouce her plans for taming inflation. Why doesn’t she do it now?? What Harris can’t control is The Federal Reserve that is losing money at breakneck speed.
Here is The Fed’s balance sheet.
I shudder to think what Harris will propose to solve the highest bankrupty (Chap 11) rate in 13 years. Probably more Bidenomics (big wealth transfers to large corporations/donors).
Meanwhile, foreigns pulled a record amount of funds from ailing China.
Kamala Harris will say anything to get elected, then fall back on her Communist agenda.
We know several things about the yield curve. First, it goes negative before recessions. Second, it is related to the inverse of The Fed’s target rate (blue line).
How about the US mortgage rate? Generally, US Mortgage rates are inverse to the 10Y-3M yield curve, but lately the US mortgage rate (pink circle) have declined with the 10Y-3M yield curve.
The yield curve does forecast recessions, but is unreliable in forecasting mortgage rate movements.
The slowing US economy has a silver lining: Treasury and mortgage rates are declining. And the is spurring faster mortgage prepayments.
Mortgage applications increased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 2, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 6.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6 percent compared with the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.3 percent compared with the previous week and was 11 percent lower than the same week one year ago.
The Refinance Index increased 16 percent from the previous week and was 59 percent higher than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.55 percent from 6.82 percent, with points decreasing to 0.58 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The deciine in rates led to an increase in MBS convexity.
Like the Go-Go’s song Manic Monday, it is a manic Monday for stocks. The awful jobs report from last Friday is reverberating through markets. The VIX (fear index) soared to 52.2 this morning.
MY fear is that Congress will go wild and start (mis)spending trillions of dollars again on hare-brained projects like green energy (and electric cars) when our electric grid can’t support the increase in electric cars.
US 2s/10s yield spread is now flat for the 1st time since 2022 on aggressive repricing of Fed rate cuts. US 2y yields have plunged by 70bps to 3.69% since last Wed while US 10y yields only dropped by 40bps in the same time.
Voters are head-over–heels for Kamala Harris, a dim-witted Marxist authoritarian.
Remember the TV show “The Biggest :Loser”? That show was about weight loss.
Now The Federal Reserve has posted a record loss of $114 BILLION IN 2023.
The cause of the loss? Massive expansion of The Fed’s balance sheet coupled with rising interest rates. The two year track record of The Fed is truly appaling. With a bloated balance sheet, rising interest rates have caused staggering losses.
Qhat a terrible jobs report! The number of unemployed rose by 352k and only 114k jobs added.
It was a 3 sigma miss to the median estimate of 175K.
May revised down by 2,000, from +218,000 to +216,000, and the change for June was revised down by 27,000, from +206,000 to +179,000. With these revisions, employment in May and June combined is 29,000 lower than previously reported. It gets better because as shown in the next chart shows, 5 of the past 6 months have now been revised lower.
And the US yield curve is screaming recession ahead!
Over the last year, native-born Americans have LOST 1.2 million jobs while foreign-born employment has increased 1.3 million; we’re just swapping out American workers at this point.
Confounded Interest - Anthony B. Sanders 
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