Free Republic

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)...

The “Goodbye Larry! (Summers)” Treasury yield decline yesterday was short lived. After Summer pulled out as a candidate for Federal Reserve Chairman, the US Treasury 10 year yield fell 11 basis points yesterday morning, but the exuberance quickly went away. ust10091713. Speaking of interest rates, the National Association of Home Builders Market Index was flat for September compared to August, but missed expectations by the most since April. nahbhbindex09171`3 If we compare the NAHB Index with new home sales, we see a daunting gap between builder “optimism” and reality. nahbnhs091713. And if we include the Bankrate 30 year rate, we...

Rising interest rates are really starting to hit the economy. The Reuters – University of Michigan Survey of Consumer Confidence Sentiment was forecast to be 82.0 but printed at 76.8 after a previous print of 82.1. This is the lowest print in 5 months. Rising Treasury and mortgage rates are definitely a cause of declining consumer confidence. Notice that the 10 year Treasury yield began to decline in mid 2011 and consumer confidence began to rise (green box). Then Treasury rates began rising on May 1st and consumer confidence fell (red box). With a lag. consumerconfid091313 We know that mortgage...

The US economy is straying further and further away from a free-market model and towards a government-controlled, crony economy. We can see the results of the move to government control of the economy in the headwinds. Like in the movie “Idiocracy” where the government orders Brawndo, a green liquid that resembles Gatorade, be used instead of water for crops, the government’s solution to all problems is more government, more regulation, more taxes, etc. Government is what statists crave. Brawndo_Social_Head (1) Here is a partial list (the actual list is way too long) of headwinds facing the economy, the housing market...

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...

As I mentioned in my Pew interview, this isn’t your mother’s housing recovery. Over stimulus by The Fed (low rate policies) and national homeownership policies encouraging lenders to expand credit backfired badly. Want further articulation? According to the Mortgage Bankers Association (MBA) weekly mortgage application survey of lenders, mortgage applications rose 1.32% from the previous week. mbaind090413 However, mortgage purchase applications fell 0.42% from the previous week. The MBA’s 30 year effective rate is in pink. The MBA’s 30 year effective rate decline slightly from the previous week. mbapurch09013 On a non seasonally adjusted basis, mortgage purchase applications fell 2.72%...

Whether it is a sign of improving economy or worries about a Fed taper, the US Treasury 10 year yield spiked 12 basis points this morning. ust10090313 The yield spike was the most in 2 months. ust10since053 Also on the bad news side of the ledger, the Assets and Liabilities of Commercial Banks in the United States (Weekly) – H.8 divulged that Net Unrealized Gains (Losses) On Available-For-Sale Securities, All Commercial Banks is dropping like a rock and is now in negative territory for the first time since 2010. netlossesh And if we chart the decline in net unrealized gains...

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...

After the pounding of war drums along The Potomac for the past several days, The Hill had this interesting piece: “Official: White House seeks Syria response ‘just muscular enough not to get mocked’“ “just enough to be more than symbolic.” Like an iPod filled with President Obama’s speeches like he gave to Queen Elizabeth. You know, just enough to be more than symbolic. Apparently, the perception in the investor community is a collective sigh of relief. Global sovereign yields rose today indicating that investors pulled out of the Treasury markets. wbm082813 And the Dow Jones Industrial Average is up 78...

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...

There are more rumblings from the Jackson Hole central banker party going on in Wyoming. 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 world’s third-largest economy. Bank of England Deputy Governor Charlie Bean said the U.K.’s pledge this month to avoid raising...

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...

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...

The Chicago Fed National Activity Index fell to -0.10 for July. That is less than the expectation of -0.15 and a decline from the June reading of -0.13. But an improvement over the REVISED print of -0.23 for June. chci Thank goodness for revisions that make even a lousy print look positive! Stocks fell in Europe and Asia and oil led declines in commodities on speculation the Federal Reserve will curb bond purchases next month. U.S. equities were little changed and Treasuries advanced. The MSCI All Country World Index lost 0.5 percent to 369.20at 9:37 a.m. in New York, the...

The 10 year Treasury yield has risen 77% since May 2nd. ust10081913a And mortgage rates (Bankrate 30yr Fixed-rate) are up 32% since May 2nd. t10b30081913 As refinancing volumes plummet, lenders are trying to extend the home financing boom by pitching adjustable-rate mortgages to borrowers, harkening back to the pre-crisis boom years. Applications for adjustable-rate loans now make up 6% of mortgage loan requests, up from 3% at the beginning of the year, though still well below the 32% peak in 2004, according to the Mortgage Bankers Association. Choosing an adjustable-rate mortgage would seem counterintuitive when interest rates are rising. But...

The Treasury 10 year yield rose today to its highest level in 2 years. ust10081613 Now for the bad news: the Treasury 10 year yield is pulling from from the German 10 year Bund yield. treasybundso The rising 10 year Treasury will likely cause the 30 year fixed-rate mortgage to rise. treas10mort Here is a chart of fixed-rate, ARM versus the 10 year Treasury. frmarmmay1 Got ARMs?

The House Oversight Committee slammed the Treasury Department on Thursday for withholding documents related to the committee’s investigation of the administration’s expansion of subsidies in the Obamacare exchanges. Committee chairman Rep. Darrell Issa (R., Calif.) and Health Care Subcommittee chairman James Lankford (R., Penn.) threatened in their letter to use legal force against the department if it does not turn over the documents by Aug. 29. The committee has been investigating for over a year the administration’s decision to expand subsidies to the federally run health insurance exchanges mandated by Obamacare. The 2010 law creates subsidies for insurance purchased on...

Today has the dubious distinction of being the 6th Hindenburg Omen in eight days. hindfed The New York Stock Exchange has seen a massive rise in its index since Quantitative Easing began. nyafed All eyes are on St Louis Fed President James Bullard for hints on tapering at 3:15pm EST today. Chances are he will say the same things as The Atlanta Fed’s Lockhart. Like the raptors in “Jurassic Park,” The Fed board members are doing coordinated attack patterns to signal their taper intentions. Raptors-in-Jurassic-Park--002 Both the US Treasury yield and dollar swaps curves are upward sloping indicating that rates...

Global sovereign yields jumped almost 10 basis points (except for Greece). wbm081313 And as of 11am EST, the US Treasury 10 year yield rose almost 9 basis points as retail sales rose in July for a fourth consecutive month. ust10081313 The US Treasury yield curve steepened (of course, it looks like the Treasury 10 year yield increase since the short-end of the curve is low and seemingly constant). 102081313 The Fannie Mae 3.0% agency MBS continues its fall from May 1, 2013. I reach a plateau since mid July but may start falling again. fannie3081313 And the Dow Jones is...

The US Treasury auction went off better than last week’s 10 and 30 year auctions. ta36mth Particularly with regard to the bid/cover ratios. The 6 month bid/cover remains at 5.01 while the 10 year and 30 year are lower and at their 2nd lowest point since early 2009 when QE1 began. This is indicating that there are fears that The Fed will slow down the taper of $88 billion per month in Agency MBS and Treasury purchases. But at the long- and mid-section of the yield curve, not the short-end. Here is a chart of Expected Future Outcomes and Most...