Chuck Cowan’s Post

Last week the 10-year Treasury was yielding 4.80% and was headed to 5. This meant mortgage rates would keep going up. After the Hamas attack there was a flight to safety and cash poured into Treasuries from around the globe, dropping yields. This made stocks more attractive, which is why they went up. I don’t think the intent of the Hamas leaders was to lower interest rates in the US and boost equities. This complicates the Fed’s efforts to keep interest rates high enough to reduce demand. Meanwhile, oil has dropped, but it is hard to know why, because there are a lot of different things pushing and pulling on oil. In the movie Moneyball they were trying to get everything down to one number, and I constantly try to figure out what the economics number is. The 10-year comes close, because it reflects expectations about long-term expectations about economic growth and price levels.

Bond pricing is worse this morning as treasury yields move higher. The U.S. 10 Year Treasury yield is currently 4.422%, above the open at 4.414%. Treasury yields have been slowly inching higher over the past couple of weeks as economic releases have suggested the economy continues to remain relatively strong with persistent inflation. Nonfarm payrolls also outperformed forecast at the end of last week pointing to a resilient jobs market. The market and the Fed will be looking to this week’s inflation data with CPI and PPI both scheduled for release. The Fed’s last meeting minutes will be released Wednesday with Fed officials making remarks at various speaking engagements throughout the week as well. There are no major releases Today. Mortgage rates are under upward pressure this morning all else constant.

Market brief - 12th April The Labour Party may have a problem.  Since the economy has started to improve under Sunak & Hunt, they will try to take credit for it and voters will need to ask, “What will change under Labour?” The IMF has warned that many borrowers are still exposed to a significant impact from refinancing fixed-rate mortgage deals. Higher costs could hit consumption and slow demand, just when the economy is beginning to see traction. We had the latest Fed minutes. Broadly, they echoed the concerns we have heard from Fed members since the last meeting, that inflation is not falling as fast as they had hoped and the prospect for 3 or 4 rate cuts this year has been put in doubt.  Indeed, inflation data for March rose to 3.5%, up from 3.2%, so that risk of residual inflation really is looking a wee bit sticky right now. The #dollarindex rallied to a high of 105.30 as the market digested the prospect that a rate cut may be pushed back further from September and on the other side of the #dollar rally, #Sterling fell to a low of 1.2520 against the dollar. #GBP kicked off around 1.2540 against #USD, 1.1675 against #EUR and #EURUSD is around 1.0735 on the open.  #Finance #FxPlew #news

This is definitely an interesting perspective on how the Fed's rapid rate hikes may take time to work their way through the economy - and causing challenges in things like real estate before hitting other areas and also highlighting there are a lot of businesses that are likely to struggle when they need to refinance their current loans. This is not going to be like previous economic cycles with interests rates held so low for so long followed by a rapid and dare I say, pretty unexpectedly steep rise! #economy #lookingbeyondyour4walls #neverstoplearning

All eyes on unemployment figures in the US tomorrow. USD getting stronger vs all currencies US treasury yields highest in decades. 10Y and 30Y US treasury yields reached the levels of summer 2007. This is pushing mortgage costs to likely further increase and the stock market to continue correcting down. Can the economy offer to see a low or unchanged unemployment rate in the US? meaning little signs of economy slowdown, meaning little sign of inflation curving, meaning even more potential rate hikes, meaning stronger USD and higher US treasury yields and mortgage costs… etc

MCT Daily Market Commentary August 7, 2023 Bond pricing is slightly worse this morning as treasury yields inch upward. The U.S. 10 Year Treasury yield is currently 4.066%, up from the open at 4.05%. Investors are still digesting last week’s jobs data that pointed to a resilient labor market as they look ahead to inflation figures due out this week. The Fed has enacted 11 rate hikes since early 2022 to cool the economy, slow the jobs market, and lower inflation. CPI and PPI due out Thursday and Friday of this week will provide clues about whether the Fed’s policy measures are having the desired effect and what the central bank may do next. Consumer credit is due out at 3 pm ET with economists forecasting a rise to $11.0 billion. Consumer credit has shown declines in recent months as consumers have become more averse to rising interest rates and revolving debt. Mortgage rates are under slight upward pressure this morning all else constant.

Bond pricing is worse this morning as treasury yields inch upward. The U.S. 10 Year Treasury yield is currently 4.541%, up form the open at 4.484%. Investors continue to clammer for clues on Fed policy against little economic news this week. Fed Chair Jerome Powell is scheduled to speak Today at 2pm ET on a panel at the IMF. Initial jobless claims released this morning showed a decrease in claims of 3k to 217k claims. Forecast was 215k and previous was 220k. Continuing claims were up to 1.83 million vs 1.82 forecast and the prior print of 1.812 million. More Fed officials will take stage Tomorrow alongside the latest consumer sentiment release. Mortgage rates are under upward pressure this morning all else constant.

Bond pricing and treasury yields are flat this morning on no economic releases. The U.S. 10 Year Treasury yield is currently 4.247, lower than the open of 4.27%. Investors get a break today to digest this week's data which included the latest round of Fed meeting minutes. The economy seems to be sending mixed signals along with Fed officials, but the market seems slightly biased towards the Fed taking a pause at their next meeting. More insight will likely come next week as the Fed goes to their annual Jackson Hole Summit. Powell will be providing comments at the close of the week that could provide a view into the Fed's next moves. Mortgage rates are flat this morning all else constant.

Our SVN Economic Update is out just in time for your weekend. Be sure to take a look at it, but here are some take aways for you: 1. CPI rose 3.2% from one year ago, while still high, inflations does continue to come down after the records highs we saw recently. 2. The US economy added 187,000 in July and unemployment stayed the same at around 3.5% 3. The average rate on a 30 year fixed rate mortgage rose to 6.96%, this is the highest since November 2022. The current predictions show a 90.5% chance of a pause in rate hikes at the next meeting in September. 4. On August 1st, Fitch downgraded the US long-term credit rating to AA+ from AAA, reflecting growing government debt, a perceived continued fiscal deterioration over the next few years, and the erosion of governance stemming from the latest debt ceiling standoff. 5. While industrial fundamentals have softened in the sector, the fall in demand will likely not be enough to reasonably shift the landlord-favorable environment we see today. The vacancy rate is hovering close to 5% and lease rates continue to climb, just at a slower pace. If you want to be sure to receive this report every time it’s produced, be sure to let me know. 

Since 2020 We Have Seen: 1. Inflation rise above 9% for the first time in 40 years 2. Second and third largest bank collapses in US history 3. Oil prices go from -$40 to $100+ in a matter of months 4. Fastest Fed interest rate hike cycle of all time 5. Least affordable housing market in history 6. Over $8 trillion in US Federal debt borrowed 7. Mortgage demand at its lowest since 1995 8. Total US credit card debt hit a record $1 trillion Yet, all three market indices are entering all time high territory. Is this the most resilient market of all time or are we being lied to?