Good Monday AM,
I hope you had a meaningful Thanksgiving with Family and Friends.
The bond market reacted as expected last week.
No real news, no real movement, just a little leaking with brings us to today where markets firmed up and the 10yr is back to 4.43% on what looks to be a path to 4.29% (assuming we make it through some resistance). Markets are more and more expecting the Fed to not only be done but also start rate cuts earlier than end of q2, likely in Q1. Just that expectation should improve pricing by another .125% to .25%. I think it is ok to float for the time being.
A couple of short pieces to share for the day…
Twenty months after the Federal Reserve began a historic campaign against inflation, investors now believe there is a much greater chance that the central bank will cut rates in just four months than raise them again in the foreseeable future. Interest-rate futures indicated last week a roughly 60% chance the Fed will lower rates by a quarter-of-a-percentage point by its May 2024 policy meeting, up from 29% at the end of October, according to CME Group data. The same data has pointed to four cuts by the end of the year.
This surprised me…
Existing home sales were down 4.1 percent in October and the 3.79-million-unit pace was the slowest since 2010. Additionally, the 1.15 million units available for sale at the end of the month was close to a record low and the lack of inventory kept prices high. The median existing home price increased 3.4 percent over the previous twelve months and was 391,800 in October. The average price is 45 percent higher than October 2019 when the median sales price was $271,100
And the next shoe to drop, credit card defaults…
A happy holiday shopping season might not end up being an especially cheery time for lenders.
Card loans are still growing on average rising 1.6% in October over September across five big U.S. card lenders, versus a seasonally typical 0.7% increase, according to tracking of the latest monthly data by analysts at Goldman Sachs. The trend suggests that consumers still are willing and able to use their cards, portending well for retailers. U.S. retail sales slowed in October, but by less than feared, and were still at an overall solid level. Some retail stocks have jumped recently on hopes for holiday shopping.
But as far as people paying back those loans, the data so far is less compelling. The average rate of 30-day-plus delinquency across the five big lenders jumped 0.16 percentage point from September to October, above the typical seasonal jump of 0.06 point, according to Goldman’s tracking. Net charge-offs jumped 0.77 point on average, compared with a 0.18-point typical rise.
Please remain safe and healthy, make today great!