Good AM on this fantastic Tuesday,
I am getting tired and worn out by the Fedspeak.
It is the biggest reason bonds have been selling off for the past two weeks and I have had enough. That of course not matters not. The 10-yr is back to 3.72% today after retracing to the 3.76% Fibonacci level just a bit an hour or so ago. We are not out of the woods yet. Mortgage Bonds are following suit and are off yet again. The Fed will keep winding this coil until more and more breaks. It is clear from the last year that the tighter the coil, the higher rates go and the tighter the housing market becomes. The Fed has single handedly broken banks and is very close to breaking housing (which of course employs about 6.5 out of 10 workers). Both Lowes and Home Depot have come out saying remodeling has slowed and their earnings are set to fall because of it.
I can get off my soap box now.
The two data points out today were new home sales which were up as builders are clearing out standing inventory and buying rates down to make it more attractive to buyers (they likely don’t need to do that now as new homes are virtually the only game in town) and Richmond Manufacturing which came in at a dismal -15 on expectation of -10.
No debt deal yet but Treasury Secretary Yellen is now saying the government can likely hold on until early June instead of June 1. The challenge with that is more time to kick the can down the road which, the politicians are very good at.
The WSJ did a piece on what has caused inflation. For us bean counters, it’s interesting stuff.
Two of the country’s top economists have an answer: It’s pandemic-related supply shocks explain why inflation shot up in 2021. An overheated economy generated by fiscal stimulus and low interest rates explain why it’s stayed high ever since. Ben Bernanke and Olivier Blanchard, provided and their conclusion: For inflation to fade, the economy has to cool off, which means a weaker labor market.
Please remain safe and stay healthy, make today great!