Free Republic

So much for the scare mongering. The Federal government shut down (or 40% of it) and the reaction in the Dow? Up 52 points as of 2:15pm EST. dow100113 The US Treasury 10 year rate also rose by 3.6 basis points. ust10100113 Gold? Dropped like a rock, but has risen slightly. gold100113 And a today’s 4 Week Treasury Bills Auction High Yield spiked. 4mthigh100113 So much for the “flight to quality” meme from the government shutdown.

<p>WASHINGTON — The Treasury will only have $30 billion of cash on hand by mid-October, putting the United States on the precipice of an unprecedented default, the department said on Wednesday.</p> <p>The warning puts additional pressure on a hamstrung Congress, which is already struggling to prevent the federal government from shutting down over a budget impasse on Oct. 1.</p>

While stocks have slipped for four consecutive days as investors turn their attention to Washington and the looming debt limit, the S&P 500 and Dow are just 2% from the all-time highs reached last week. In addition to the muted market action, a key metric for measuring market fear and volatility, the VIX (VIX), is indicating calm markets. While CNNMoney's Fear & Greed Index has ticked just slightly into "Fear" mode, from neutral earlier in the week. "I think if you look at the calm out there, it's a bit greater than it should be," Lew said at the Bloomberg...

The markets were stunned by The Fed’s decision last week not to begin tapering. Investors reacted … like deer in the headlights. deerheads Take the Dow Jones Industrial Average. After initial optimism on The Fed’s “No Taper” message, it has turned down. djiapostfomce The 10 year Treasury yield dropped with The Fed announcement and has continued to drift downwards. ust10postfomc As would be expected, both mortgage rates (yellow) and the Fannie Mae 30 year current coupon rate have drifted downwards. mtgratepostfomc Gold? Gold prices surged initially but had drifted downwards to about pre-announcement levels. goldpostfomc The good news? Both the...

Poor Larry Summers. He withdrew his candidacy as the Federal Reserve Board Chairman over fears of a brutal Senate confirmation hearing. Now we are left with former University of California labor economist Janet Yellen as the leading candidate. Yellen was (allegedly) the architect of the quantitative easing programs to reduce unemployment (better known as the weak money rally). And Yellen is the darling of the labor unions because of her activist policies on labor. Hence, President Obama and Democrats are proudly supporting her appointment. “The philosophy of Janet Yellen is activism of government policy to achieve objectives,” said Allen Sinai,...

Poor Larry Summers. He withdrew his candidacy as the Federal Reserve Board Chairman over fears of a brutal Senate confirmation hearing. Now we are left with former University of California labor economist Janet Yellen as the leading candidate. Yellen was (allegedly) the architect of the quantitative easing programs to reduce unemployment (better known as the weak money rally). And Yellen is the darling of the labor unions because of her activist policies on labor. “The philosophy of Janet Yellen is activism of government policy to achieve objectives,” said Allen Sinai, president of Decision Economics Inc. Oh great. We have activist...

Bernanke’s surprise (NO TAPER) resulted in a large decline in the 10 year Treasury yield yesterday and a small rebound today. ust10091913 But despite the surprise, the yield curve has declined only slightly compared to its increase after May 1st. yc091813 World bond markets are in a sea of green, particularly the UK and Italy. Even beleaguered Greece dropped 21 basis points in 10 year sovereign yield. wbm091913 Precious metals (gold, silver) soared on The Fed’s Taper bluff. goldsilvfed2 To quote The Who, “We won’t get fooled again!”

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”...

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)...

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...