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<p>An economy still stumbling toward recovery was not enough to sway the Federal Reserve, which defied market expectations Wednesday and said it will not begin pulling back on its monthly asset-purchasing program. Stocks surged on the news but bond yields were flat.</p>

The Federal Reserve Open Market Committee released its update to QE: no change. The market was expecting $5 billion to be cuts from Treasury purchases, but nada. fedannouince Here is the redlined FOMC statement: 169179285-September-FOMC-Redline The Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs to see more evidence of improvement in the economy. “The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. While “downside risks”...

More pain at the pump for the middle class, but according to Wall Street this is a good thing.

The Federal Reserve Open Market Committee released its update to QE: no change. The market was expecting $5 billion to be cuts from Treasury purchases, but nada. fedannouince The Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs to see more evidence of improvement in the economy. “The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. While “downside risks” to the outlook have diminished, “the tightening...

The Federal Reserve Open Market Committee is meeting today and tomorrow with an announcement tomorrow afternoon at 2pm EST. Virtually no one is expecting a change in the Fed Funds Target. fedconsesn What everyone is watching is a change in the Fed rate of purchase of Treasuries and Agency Mortgage-backed Securities. 20130917_FOMC If The Fed does nothing, I will be surprised. The most likely “taper” is $5-10 million per month, mostly or all in Treasuries. Agency MBS purchases are likely to remain unchanged. While there is some positive momentum in the economy, real median household income is declining. household-income-monthly-median-growth-since-2000 (1)...

Larry Summers pulled out of his candidacy for Federal Reserve Chairman, leaving Janet Yellen (a dovish UC Berkeley economics professor) as the leading candidate. A Yellen appointment as Fed Chair means MORE printing and Quantitative Easing. Particularly since the economic news points to a moribund economic recovery. New York’s Empire Manufacturing Index printed at 6.29, less than the expectation of 9.10. Industrial production rose 0.4%, also less than the expectation of 0.5%. Capacity utilization rose to 77.8%, but still can’t break the magical 80% barrier. beco091613A The reaction to Summers’ pull out and the likely about of a Berkeley dove...

Japan’s Nikkei is reporting that President Obama is going to nominate Administration insider Lawrence Summers as Federal Reserve Chairman. Summers would replace current Chair Ben Bernanke. This nomination is in spite of the total lack of experience of Summmers in the Federal Reserve system. What experience does Summers have? 1. He was on the staff of the Council of Economic Advisers under President Reagan in 1982–1983. 2. Summers served as an economic adviser to the Dukakis Presidential campaign in 1988 which ended in disaster. dukakis 3. He served as Chief Economist for the World Bank until 1993. 4. He served...

Is The Fed enthused about declining unemployment rates? Unfortunately, unemployment is falling for the wrong reason. At first glance, you may be tempted to say “Ah-ha! Quantitative easing (money printing) is working!!!!” u3fedbal Alas, you would be wrong. According to the Bloomberg article, While unemployment dropped last month to 7.3 percent, the lowest level since December 2008, the decline occurred because of contraction in the workforce, not because more people got jobs. Labor-force participation — the share of working-age people either holding a job or looking for one — stands at a 35-year low. Yes, I would say that an...

Come with me, you the sea of … red. Almost every major nation has seen its 10 year sovereign yields rise today … and over the past 6 months. seofred The US 10 year has climbed over 100 basis points in the last 6 months, close to the UK’s rise. Our Latin American neighbors, Mexico, Brazil and Colombia have seen over 132 basis point increases. Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Federal Reserve said today. The...

The U.S. Treasury Department sold $29.000 billion of seven-year notes at a yield of 2.221 percent, as demand fell relative to the last auction of securities with the same maturity. ust7auc The bid/cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, fell to 2.43 from 2.54 at the last seven-year note sale, indicating weaker demand. The bid/cover ratio was the lowest since 2.26 at the May 2009, auction. 7ybdrat The same occurred at the last 10 year auction of Treasury debt. Again. back to 2009 levels. bidcover333 Indirect bidder participation (which includes...

Is the economy finally healing? It has been over 4 years since the alleged end of the recession. Foreclosures are improving, mortgage rates came down a bit and Q2 GDP was revised upwards to 2.5% from 2.2%. today The Freddie Mac Loan Commitment rate for 30 year fixed actually fell a bit. This is not surprising giving the recent trends in the Treasury 10 year yield. Still, the 10 year Treasury yield is up 115 basis points since May 1st. freddke30us10 FHA Serious Delinquencies and Foreclosures are down to 7.57% as of June 2013, a noticeable decline from 9% at...

Inflation has been notably absent from the economy this summer, despite bullish moves in gold and a continued debate over the tapering of asset purchases by the Federal Reserve. According to Art Cashin, director of floor operations at UBS Financial Services, the central bank's effect on the financial system has worrying parallels to the period leading up to the Great Depression. "The weak data that we've gotten, particularly the housing on Friday, hints that tapering may be held back or may not be a factor, " Cashin told "Squawk on the Street" on Monday. "Many of the proponents of gold...

Statist central bankers plan to devalue their respective currencies and risk inflation even if The Fed tapers. Since Central Banks compete with each other, low rate pressures should keep US Treasury rates in line. Central bankers from Japan and the U.K. predicted their new campaigns to encourage expansion will work, sustaining support for global growth even as the Federal Reserve considers a reduction in stimulus. As the annual gathering of central bankers and economists in Jackson Hole, Wyoming, drew to a close yesterday, Bank of Japan Governor Haruhiko Kuroda said his souped-up asset-buying “has started to exert effects” on the...

Stanford University economist John Taylor feels that ‘Sooner the Better’ for Fed to unwind quantitative easing. Here is Taylor’s take on the first day of the Jackson Hole party. According to Taylor, academics outside the Fed revealed considerable skepticism about the effectiveness of the Fed’s quantitative easing and forward guidance programs. Of course Fed officials did not express the same doubts. The first paper was by Bob Hall. It argued that neither quantitative easing nor forward guidance was effective, or as he put it, “Both quantitative easing and forward guidance, as implemented by the Fed, are obviously weak instruments.” He...

According to CoreLogic, U.S. home prices rose 1.2% in June and were up 11.9% Year-Over-Year (YoY). lpsjune2013 LPS closely tracks the Case-Shiller 20 index, so it gives a nice preview of the yet-to-be-released CS index for June. hpmulti Notice that the FHFA Purchase Only Index is at a higher level and the FNC 20 RPI index is at a lower level. But all have been rising since early 2012. The increase in house prices are in spite of rising mortgage rates and lethargic purchase applications. mbapurchasefreddierate mtgratehp And a labor market where 75% of jobs created were part-time. LPS house...

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates following bond yields higher, and reaching new highs for the year, with the expectant release of the Fed’s comments around taper timing of its bond purchase program. 30-year fixed-rate mortgage (FRM) averaged 4.58 percent with an average 0.8 point for the week ending August 22, 2013, up from last week when it averaged 4.40 percent. A year ago at this time, the 30-year FRM averaged 3.66 percent. freddie30 Here is the Freddie rate against the 10 year Treasury yield. freddie30t30y Mortgage-backed securities...

Here are the minutes of the most recent FOMC meeting. Federal Reserve officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy improves, with a few saying tapering might be needed soon, minutes of their last meeting show. In other words, it was a hawkish set of minutes pointing to tapering. The reaction in the US Treasury 10 year yield? ust10082113 And agency MBS prices fell about 12 basis points. mbs082113 And the globe is awash in blood (as in rising sovereign yields). wbm082113 Here is a photo of...

So let's pretend for the moment that the Federal Reserve gets everything it has stated it wants. And even further, that Washington, D.C. gets everything it wants, too. The credit markets are repaired, and massive new loan growth flows out the door. Loans are made to businesses that hire gobs of new people. Consumers borrow and borrow some more to go to school and buy homes, cars, and gadgets. Inflation remains low and job growth explodes. Tax receipts climb and the deficit falls. The stock market goes higher and higher, gold falls and then falls some more, as confidence in...

Global sovereign yields are up across the board this morning. wbm081913 And the US Treasury 10 year yield is at its highest point since July 28, 2011 — the is over 2 years. ust10081913 Fed Chair Ben Bernanke will not be attending the retreat this year. The Federal Reserve began buying Treasuries as part of its outright purchase program. Here is a list of long-term bond purchase targets. Clearly, The Fed is hoping to push down the long-end of the curve. yc081913 Has The Fed run out of ammo? I think the answer is yes.

The inflation numbers were released yesterday showing an increase of 0.2%, according to the Bureau of Labor Statistics. The Year Over Year inflation rate is 2%. cpiyoy081613 House prices have come roaring back from the burst of the housing bubble. crecs cshpfnc But the housing portion of the CPI measure, owners equivalent rent of residences YoY, shows a different pattern. Although house prices have skyrocket, owner’s equivalent rent has been at 2.1% or so since May 2012. rentoecpi If we compare the Case-Shiller house price index to the owner’s equivalent rent, we see a different picture. csyoyrentequiv If house prices...