Good Tuesday AM,
Well! We have a bit of a rally this morning.
The 10-yr is down to 4.09 and mortgage bonds are +55bs. It began with the overnight markets and held through the open. This has not been the trend. Consumer confidence was released later as was the Richmond Man Survey. Both tanked and has helped things move in the right direction. There is likely strong resistance at these current trading levels, so be careful. It is hard to trust this move fully. We need further confirmation before I get too excited.
Keep in mind that Thursday and Friday are coming with the biggest news of the month.
If GDP comes in strong, or the PCE numbers come in hot, we will likely see a selloff. For today, let’s see how this plays out. The Fed to face some music. Falling bond prices due to rate hikes are creating a hole in the Fed’s finances that may require the Treasury to fill. The Federal Reserve is among central banks that are now sitting on paper losses on their massive bond holdings, which were accumulated as part of their rescue efforts in recent years. The US Treasury will see a “stunning swing,” going from receiving about $100 billion last year from the Fed to a potential annual loss rate of $80 billion by year-end. How will they fill that hole? By selling assets. Likely new bonds. 🙂
The percentage of bank deposits tied up in certificates of deposit during the first quarter of 2022, an all time low according to the Federal Deposit Insurance Corp. Banks have begun selectively raising interest rates on deposits, with many paying their best rates on so-called brokered CDs, which well-off customers buy through brokerage firms. Savings are being depleted and credit card debt is accelerating. It is going to be an interesting few quarters.
Please remain safe and stay healthy, make today great!