Good Thursday AM,

Jobless claims out today and kind of in line with expectations.

Bonds trading all over the place and for the moment are in positive territory. Fingers crossed it holds. This really comes down not to economic data, but to the Fed selling off their portfolio.. In the first half of 2023, banks and the Fed collectively reduced their portfolios of so-called agency mortgage-backed securities by about $207 billion, according to figures compiled by strategists at Bank of America. This alone is pushing rates higher and causing a self-fulfilling prophesy… the Fed is selling at a bigger loss causing rates to go higher which is causing the Fed to sell at a bigger loss and so on and so on. There is a very quick fix. The Fed should just say they are slowing down the pace of sales. That alone will bring markets back in line. Tomorrow is a big day for the markets with the jobs report.

Tough to float into any big data day. I don’t advise it although markets could react positively.

On that topic, a record run of downward revisions to the federal government’s monthly jobs report is discouraging some Wall Street traders from making big bets on the data. The report is typically one of the most-watched economic releases on Wall Street because it helps signal the course of the Federal Reserve’s interest-rate policy. But each Labor Department release this year has revised prior reports lower, the first time on record that revisions have been negative every month through July. To some traders, the revisions potentially complicate Wall Street’s narrative that the economy’s strength means interest rates will stay high for longer than expected.

The U.S. has long been the lender of last resort to the world.

During the emerging-market panics of the 1990s, the global financial crisis of 2007-09 and the pandemic shutdown of 2020, it was the Treasury’s unmatched capacity to borrow that came to the rescue. Now, the Treasury itself is a source of risk. No, the U.S. isn’t about to default or fail to sell enough bonds at its next auction. But the scale and upward trajectory of U.S. borrowing and absence of any political corrective now threaten markets and the economy in ways they haven’t for at least a generation. That’s the takeaway from the sudden sharp rise in Treasury yields in recent weeks, Greg Ip writes.

Do you know who your lender is and if they are competitively priced for your clients?

The rapid speed of the Federal Reserve’s rate increases has injected volatility into everything from bonds to bitcoin. In the world of mortgage rates, it means that two buyers with similar financial profiles, making similar purchases, can wind up with monthly payments that differ by hundreds of dollars.

Typical mortgage rates now range some 0.4 percentage point above or below the average rate, according to an analysis of application data by mortgage giant.

Interesting side effect…

Walmart says people taking the diabetes drug Ozempic, Wegovy, and other appetite-suppressing medications are buying less food. Shoppers are taking home fewer items in their baskets and purchasing a slightly lower number of calories, according to John Furner, the chief executive officer of Walmart’s US operation. Walmart is studying changes in sales using anonymized data on shoppers. The company can use this to look at the purchasing changes among people taking the drug and can also compare those habits to similar people who aren’t taking the shots. The CEO of the maker of Pringles and Cheez-Its also said this week the company is studying their potential impact on dietary behaviors.

And, I guess there’s no reason to play Powerball for the moment…

Winning a billion dollars has never been such a letdown. Monday’s Powerball prize had a $490 million cash value, less than half of the advertised $1.04 billion, making it the tiniest 10-figure jackpot ever. In 2021, a similar $1 billion Mega Millions jackpot paid out a lump-sum prize of $776 million. Did the lottery people buy a shrink ray? Not quite. Winners have two choices. They can take the cash value now or opt for 30 annual payments that add up to the listed jackpot. The full jackpot amount is arrived at based on the returns of investing the cash prize in a portfolio of bonds. With the Federal Reserve raising interest rates to a 22-year high and bond yields following close behind, it takes far fewer 2023 dollars to buy bonds that pay out a billion dollars by 2052, Jeremy Olshan reports.

Please remain safe and healthy, make today great!