Good Friday AM,
Dan Rawitch came in with a good piece this a.m. I think he is on the money here (although I am not yet sold on being able to pick specific days into the future of trade flow).
“Bonds are off this morning and you may be wondering… Why is it that one of the biggest misses on the Non Farm payroll numbers, is not causing bonds to rally? Simple- the culprit in my opinion is the hourly earnings number. This number was significantly higher than expected and it makes traders think about wage inflation. They are not wrong to worry about this, but they are wrong to think the number will cause the FED to move rates higher. Won’t happen. Job creation is number one on the Fed charter. This low number is a concern and wage inflation is the TEMPORARY solution toward getting people off their A#s’s and getting back to work. While I believe this because the Fed does not want to give companies a reason to not want to fill all of their open employment recs. It is my belief that traders are confused and when in doubt close it out. They are selling bonds into this confusion. Clarity will follow soon and prices will bounce back. Perhaps not today, due to the three day weekend and light trading volume. Whatever bounce we do see may be reversed because there is some significant seasonal disadvantage heading toward treasuries in beginning today. In fact, 11 out of the last 15 years have been negative for bonds from NOW until the 18th of Sept. There are also some significant cycles coming to a head around the 17th of September. We could see some heavy selling in bonds at that point. I will be watching for confirmation and keep you advised. My hope is that seasonal ADVANTAGE that runs from Sept 18 to Oct first will soften some of this time cycle threat. For what it is worth, these vary cycles I speak of, almost perfectly predicted the last bond market rally.”
The MBA dumbed down what we all know, prices have gone up. But it is always good to see it articulated in words I can understand.
Home price appreciation continued to accelerate in the second quarter of 2021, driven by robust housing demand, which continues to outpace the supply of homes for sale. Some prospective home buyers have taken out larger loans, while others, such as first-time homebuyers or those looking for less expensive homes, have been priced out of the market. This week’s chart compares home price trends with average mortgage application loan sizes. The FHFA’s second quarter 2021 house price index data, the most recent report available, showed that home prices in June rose 18.8 percent compared to June 2020, while for the second quarter, the annual growth rate was 17.4%. Both measures set new records for annual price growth. The demand-supply imbalance existed before the pandemic but was exacerbated as housing preferences shifted toward homes more suited for remote work. Supply was also hindered as the home building industry faced higher costs and delays from their suppliers for inputs. Construction labor shortages have also become a challenge in recent months, as BLS data showed vacant job openings rising again.
Please remain safe and healthy, enjoy the holiday weekend and first, make today great.
