Good Friday AM,

All assets getting beaten up today. That would include bonds.

Volatility running high again as the 10-yr yield is up 20bps this week alone and knocking on the door of 3% again. The Federal Reserve says it is going to keep raising interest rates. Wall Street thinks it’s bluffing. This could spell trouble for both of them. Markets pummeled by the Fed’s rate increases in the first half of the year are racing upward. For many investors, the rebound reflects a belief that inflation has peaked, and expectation that the Fed will shift from raising rates to lowering them sometime next year.

A parade of Fed officials has tried to push back.

Last week, Minneapolis Fed President Neel Kashkari said an expectation the Fed will start cutting interest rates in the next six to nine months isn’t realistic. It is more likely the Fed will “raise rates to some point, and then we will sit there until we get convinced that inflation is well on its way back down to 2%,” he said. If the Fed follows that path, markets are likely to face a painful reckoning—one that could unwind much of the recent rally and extend what has been a tumultuous stretch for investors from retail traders to hedge funds to pension funds. Fed’s Bullard told the WSJ he leans Toward Favoring 0.75-Percentage-Point September Rate Rise. No data out today so this is what markets are digesting.

Yesterday we heard from the NAR that U.S. existing home sales fell in July for the sixth straight month. This is the longest streak of declines in more than eight years, as higher mortgage rates and a shortage of homes for sale are cooling this once red-hot market. Sales of previously owned homes dipped 5.9% in July from the previous month to a seasonally adjusted annual rate of 4.81 million. That was the weakest pace of sales since November 2015, excluding the three-month pandemic-related drop in the spring of 2020. July sales tumbled 20.2% from a year ago.

Rates need to (and will) come down.

The drop-off is the latest sign that the formerly booming housing market is stalling out. Home-building is also drying up, and mortgage applications are falling as more buyers keep to the sidelines. “We are in a housing recession,” said Lawrence Yun, chief economist for the National Association of Realtors.

And some good news for more than 7.5 million people who defaulted on their federal student loans.

Under guidelines released by the Biden administration, they would be able to regain their eligibility for financial aid. The “Fresh Start” initiative aims to allow borrowers who defaulted on federal student loans before the administration put a pause on payments during the pandemic to receive aid such as Pell Grants and federal work-study, and relieve the impact on their credit history. Millions of borrowers haven’t had to make monthly payments on their student debt since March 2020 under the current freeze. The moratorium is set to expire at the end of the month should President Biden take no action to extend it..

Please remain safe and healthy, enjoy the weekend and first, make today great.