Feelin’ Hot, Hot, Hot! US Inflation Soars To 8.6% YoY For May, Fed Expected To REALLY Start Jacking-up Rates (Mortgage Rates Rise To 5.58%, The Highest Since 2009)

Inflation, the bane of the middle class and working families, just rose to 8.6%.

Core inflation, that excludes energy and food, actually declined slightly to 6% from 6.2% in April. But since most families are concerned with gas prices and food, (not to mention home prices growing at 21.17% YoY), core inflation really underestimates the suffering.

Under Biden’s leadership in cooperation with eternal Fed stimulus (until now), inflation started at 1.4% YoY and has increased to 8.6% YoY. The Fed’s balance sheet has increased by 20.27% (more monetary Stimulypto!), Case-Shiller home prices started at 10.44% YoY and has now doubled to 20.55% YoY. Regular gasoline started at $2.57 and is now at $5.42, up 102%. Food is up 61%.

The Fed is expecting two half-point hikes followed by quarter-point increases.

And mortgage rates keep rising as The Fed fights the inflation fire.

Here is a video of Milton Friedman speaking on inflation.

On the hotter than expected inflation news, the US Treasury 10Y-2Y curve flattened to 12 bps.

Tower of … inflation?

Heartaches By The Number! Under Biden, Mortgage Refi Applications Down -82.4%, Purchase Applications Down -7.5% And Mortgage Rates Up+80.7% (Fed FINALLY Begins Removing Stimulus!)

Heartaches By The Number … for American households and mortgage lenders as The Federal Reserve begins FINALLY removing monetary stimulus.

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 27, 2022.

The Refinance Index decreased 5 percent from the previous week and was 75 percent lower than the same week one year ago.

The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 14 percent lower than the same week one year ago.

Under Biden, mortgage refi applications are down -82.4%, purchase applications are down -7.5% and mortgage rates are up +80.7%.

Then we have this headline: “Fed Starts Experiment of Letting $8.9 Trillion Portfolio Shrink”

The Fed is capping monthly runoff at $47.5 billion — $30 billion for Treasuries and $17.5 billion for mortgage-backed securities — until September. Those thresholds will then double to a combined $95 billion. That compares to a peak of $50 billion a month when the Fed performed the exercise starting in 2017.

As expectation of Fed rate hikes increase, mortgage rates have soared like Tom Cruise’s Super Hornet aircraft from Top Gun: Maverick climbing over the steep mountain.

And mortgage rates are up a bit today.

Meanwhile, The Federal Reserve begins shrinking their balance sheet for the first time since Yellen and company started shrinking it under Trump.

Slowing? US Closed House Sales Down -9.50% YoY As Mortgage Rates Rise On Fed Tightening (New Listings Down -5.7% YoY)

US home prices were growing at a near 20% YoY rate for the latest Case-Shiller National home price index report. But mortgage rates have soaring like a SpaceX missile shot.

The result? Closed sales for April 2022 are down -9.5% YoY.

Of course, I am moving to one of the metro areas in the USA where closed sales fell only -1.10% YoY in April: Columbus Ohio. I should move to San Diego CA where closed sales fell -21.4% YoY.

Of course, the US still suffers from lack of available inventory for sale.

April new listings are down -5.7% YoY. Columbus Ohio didn’t change from April ’21. San Diego is down -18.4% YoY for new listings.

Rising mortgage rates? Inflation? What a total fiasco.

Fear The Talking Fed! Mortgage Payments Rise 43.4% YoY As Fed Jawbones Monetary Tightening (But Still Has Not Shrunk Balance Sheet Yet)

Mortgage rates have increased dramatically under “Middle Class Joe” as The Federal Reserve attempts to choke-off inflation caused by … The Fed coupled with Biden’s energy policies (hope you are enjoying those high gasoline and diesel prices!) and the Federal government’s staggering spending spree under Pelosi, Schumer and McConnell.

Thus far, The Federal Reserve has leveled-out out their Treasury Note and Bond purchases, increased their Agency Mortgage-backed Securities (AgMBS) holdings, but strangely have reduced their holding of Treasury Inflation-Protected Securities (TIPS) in the face of rising inflation.

And while The Fed Funds Target rate is a lowly 1%, it is projected to rise to 2.890% by the February 1, 2023 FOMC meeting. That should send mortgage rates up.

As if mortgage rates haven’t skyrocketed already, thanks to The Fed’s jawboning about having to raise rates and extinguish inflation.

With sizzling mortgage rates (cooling a bit as the global economy slows), home mortgage payments have risen +43.4% YoY.

Now we have President Biden trying to scare us about the Monkey Pox, yet leaves the southern border wide open. One would think that Biden would shut the borders (as if the surge in Fentanyl, sex trafficking and other diseases aren’t reason enough. But I do predict another massive spending bill from Biden/Congress to combat Monkey Pox and the resurgence of Covid variants.

Meanwhile The Fed jawbones fighting inflation with monetary tightening in the future, even if they jawboning causes mortgage rates to soar and mortgage payments to spiral.

Beat The Heat! Mortgage Purchase Applications RISE 5% From Previous Week As Homebuyers Scramble To Beat The Fed’s Monetary Tightening

Yes, homebuyers are jumping into a generally slowing housing market to “beat the heat.” That is, beat The Fed’s monetary tightening.

Mortgage applications increased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 6, 2022.

The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 8 percent lower than the same week one year ago.

The Refinance Index decreased 2 percent from the previous week and was 72 percent lower than the same week one year ago.

Beat the Heat!! Or Beat The Fed!!

As least inflation came in slightly cooler in April at 8.3% YoY. While housing (own or rent) is rising at over 2x CPI.

Simply Unaffordable! Mortgage Purchase Applications Rise 5% From Previous Week, But Remains DOWN 11% From One Year Ago As Fed Tightens (ARM Share Rises To 9.3%)

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 was 11 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%.

Is the US housing market addicted to gov? We will find out if and when The Federal Reserve actually tightens monetary policy.

Bond Rout! Treasury Curve Settles In At 20BPS (10Y-2Y), SOFR Coupons Slow To Adjust To Fed Rate Hikes, While Mortgages FAST To React (CoreLogic March Home Prices UP 20.0% YoY In March)

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.

Meanwhile, CoreLogic revealed that March 2022 home prices were still sizzling at 20.9% YoY.

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.

Here is Marv’s baseball card from better days with the Yankees before they figured out that Marv was a terrible fielder. And strikeout quite a bit, like The Federal Reserve.

The Great Reset … In Housing? Typical Buyer’s Monthly Payment Up 39.4%—The Biggest Annual Gain on Record (Mortgage Rates SOARING With Anticipated Fed Monetary Tightening)

We now have the proverbial double whammy happening … soaring home prices AND soaring mortgage rates.

The theory is, of course, that The Federal Reserve will slowly remove its staggering monetary stimulus leftover from 1) the financial crisis of 2008 and 2) the Covid recession of 2020. As you can see, the sheer volume of monetary stimulus remains outstanding and it is the EXPECTATIONS of The Fed tightening that is caused the 30-year mortgage rate to rise.

So, The Federal Reserve is participating in The Great Reset by helping send mortgage rates to the moon. But with soaring mortgage rates and still red-hot home price growth, a typical buyer’s monthly payment is up 39% —the biggest annual gain on record.

While I used the Case-Shiller National Home Price Index YoY, Redfin shows more contemporaneous home price data with April 24 median home sales price at 16.8%.

Thanks to The Fed, we are seeing homebuyer mortgage payments are up 39.4% YoY.

As inflation continues to damage America’s middle-class and low- wage workers, we may see regulations going into effect from the Consumer Financial Protection Bureau protecting consumers from … themselves.

Terminal (Money) Velocity? M2 Money Velocity Crashes To Near All-time Low As Fed Continues To Print Money At 9% YoY Clip (Mortgage Rates Keep Rising)

M2 Money Velocity (GDP/M2 Money) peaked in Q3 1997, but after several bouts of Fed money printing, M2 Money Velocity is near the all-time low at 1.1216 In Q1 2022. And M2 Money stock is still growing at a torrid pace of 9.9% YoY. But the massive overreaction of The Federal Reserve in response to the Covid outbreak has led to near zero money velocity.

Now with The Federal Reserve considering removing the monetary stimulus, what will happen to US GDP left to survive on its own?

An example of how The Fed’s expected tightening of monetary policy can be seen in the meteoric rise in mortgage rates.

So, the US has hit terminal money velocity. I wish The Fed lots of luck going forward.

Is Charlie Sheen the Chairman of The Federal Reserve Board of Governors?? That must be Lael Brainard falling out of the sky with Charlie Sheen (aka, Jerome Powell).

US Mortgage Rates Rise To 5.25%, Up From 2.88% Under Biden (Fed May Boost Rate 50 BPS At Next Meeting)

Fortunately, I refinanced my home mortgage while Trump was still President. When Biden was installed as President, the 30-year mortgage rate was 2.88% (according to Bankrate). It has now risen to 5.25%.

The Federal Reserve is now expected to raise their target rate as much as 50 basis points at the next meeting on May 4, 2022. This chart shows the anticipated rate hikes coming our way, peaking in summer 2023.

Fed Funds Futures are pricing in a 50 bps rise at the May meeting.

The good news is that the US Treasury actives curve is upward sloping, but is showing fatigue in the forward rates between 7Y and 10Y.

On the hard asset front, precious metals are up over 1% with silver and platinum leading the way.