Good Morning on this Friday the 13th,
Any question on whether growth is slowing can be answered in today’s Consumer Sentiment number. Of all the pundits out there, US consumers as a group are the smartest. As reported, Consumer Sentiment came in at 70.2 on expectations of 81.2. That’s a fairly large miss and just adds more credibility to the argument that inflation (and growth which drives inflation) is transitory. Tough for markets to debate it. They will, though, debate the cause. Is it from a flushing out of pent up demand from 2020, which is waning? Or a result of new restrictions and hesitations because of the Delta variant? A combination of both I would assume, but I don’t think there is a way to know definitively while the lockdowns (a port in China, the third busiest port in the world, was partially closed yesterday because of one case of Covid), vaccine mandates, travel restrictions, etc. are unfolding daily. For now (and I mean in this moment as I am typing), the market, despite healthy (albeit slowing) CPI numbers, is taking more of a risk neutral to risk off posture. The 10-yr is back below 1.30% which is important and mortgage bonds are doing well +32bps. We will see how the day ends but if we hold these gains, and while I typically do not like floating locks into a weekend, I likely will.
| The MBA does come out with some great research. No joke that I have wondered how much missed rent payments has cost landlords. Low and behold, the answer is below. Since the pandemic, the 2.86 million households who missed June rental payments have missed an average of 6.2 payments since the onset of the pandemic, with mean cumulative back rent owed of $4,995 (or $14.27 billion in total). Examining the distribution of missed payments (blue line), a little more than 1 million of these households (37.5%) have missed 3 or fewer payments since April 2020, while 800,000 (28.1%) have missed 10 or more payments. On August 11, The Wall Street Journal reported, “Since last December, Congress has appropriated a total of $46.6 billion to help tenants who were behind on their rent. As of June 30, just $3 billion had been distributed, though a senior official said the Biden administration hoped at least another $2 billion had been distributed in July.” Since the start of the pandemic through the second quarter of 2021, analysis of the UAS data shows aggregate missed rental payments of $41.7 billion, and approximately $31.6 billion of back rent owed as of the end of June 2021. Households that missed June payments account for $14.27 billion of the back rent owed, with the chronically late households in that group (more than 10 missed payments) owing $7.86 billion. I don’t know how much sympathy there will be from landlords when the eviction moratorium is up. |
Please remain safe and healthy. Enjoy the weekend and first, make today great!
