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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (21024)	6/20/2018 3:29:25 AM
From: John Pitera	2 Recommendations Recommended By Ms. Baby Boomer The Ox Respond to of 33421

Bond Traders Get Ready for Yield-Curve Inversion as Soon as Next Week By Alexandria Arnold and Liz McCormick June 19, 2018, 11:21 AM EDT Updated on June 19, 2018, 2:01 PM EDT The first step in the inversion of the U.S. Treasury curve may be *poised to occur as soon as next week.* The spread between 7- and 10-year yields slipped below 3.5 basis points Tuesday, after shrinking to 2 basis points last month, *the smallest gap since at least 2009.* The difference between the maturities, the narrowest among on-the-run benchmarks, may not be particularly well-watched. But its descent into negative territory has historically been a harbinger of similar moves elsewhere along the curve, often in as little as a few days, according to data compiled by Bloomberg and BMO Capital Markets. Next week's 7 year auction could lead the notes to underperform just as concerns over trade and global growth anchor longer-term yields, tipping the spread below zero, according to Ian Lyngen at BMO. While hotly traded curve plays including the 2-to-10-year and 5-to-30-year gaps would likely take weeks if not longer to follow suit given current levels, investors will view the initial inversion as a sign of more to come, he said. “*I watch the 7s/10s curve as the proverbial canary in a coal mine,” said Lyngen, BMO’s head of U.S. rates strategy. “Once we see part of the curve dip into an inverted state, then the market will probably be content to let other sectors of the curve invert* without as much resistance.” The shape of the curve has policy makers on edge, given that a *negative slope has historically been a precursor of recessions. Several Federal Reserve officials have warned that they should tread lightly with tightening to avoid unintentionally bringing about such an outcome. Curve AttitudeOn Monday, Atlanta Fed President Raphael Bostic said the flattening curve “is not something we can afford to be too cavalier with and think this time is different.” He noted that market perception that the curve is inverting “could trigger its own response that would increase volatility.” During the Fed’s 1988 tightening cycle, other areas of the curve turned negative around 6 to 28 days after the gap between 7- and 10-year yields went below zero,* according to BMO. In the *hiking phases that began in 1994 and 2004, inversion took hold even quicker,* according to research using a seven-year off-the-run Treasury for modeling periods when the government wasn’t issuing the maturity. “If the Fed decides to move more this year, I think it’s inevitable that the curve inverts and I think it will be a mistake,” said Colin Robertson, managing director of fixed income at Northern Trust Asset Management. The firm has *$423 billion in fixed-income assets under management. He sees greater than a 50 percent chance of the 2- to 10-year spread inverting if the Fed raises rates once more this year, and if the central bank follows its projections and hikes twice more, Robertson sees inversion as a lock.* bloomberg.com JP

To: richardred who wrote (21024)	11/19/2018 11:03:45 AM
From: richardred	2 Recommendations Recommended By Ms. Baby Boomer sixty2nds Respond to of 33421

FWIW- I don't see any more fed increases. IMO-From here on the US economy moving forward will deal with a higher floor base in interest rates. Some of the speculative appeal has been taken out of the stock market more recently. That also applies to Bitcoin. Home builder confidence tumbles the most since 2014 as housing headwinds catch up Published: Nov 19, 2018 10:00 a.m. ET Sentiment didn’t fall this sharply from one month to another even during the worst of the housing crisis By Andrea Riquier Bloomberg News/Landov Contractors work on a KB Home project. Builders have started 6.4% more homes so far this year than in the same period last year. The numbers: The National Association of Home Builders’ monthly confidence index plunged eight points to 60 in November. What happened: The many headwinds that have been dogging the industry finally showed up in this report. Labor is still expensive, lots are still scarce, lumber is at the mercy of tariff politics, and now, mortgage rates are rising and customers are holding back. NAHB, the building industry’s Washington lobby, noted in a press release that the reading of 60 is still “positive,” but that “customers are taking a pause.” The eight-point plunge is only reminiscent of the nine-point drop just after the 9/11 attacks and one other instance, a 10-point drop, in early 2014. The overall reading is the lowest since mid-2016. November’s results badly missed the Econoday consensus of a flat reading. In November, the sub-gauge of current conditions fell seven points to 67, the tracker of expected future conditions plunged 10 points to 65, and the gauge of buyer traffic was down eight points, to 45. Any reading over 50 signals improvement. Also read: Housing starts lurch lower in another weak month for residential construction Big picture: The gauge of builder sentiment has long been considered an early read on the pace of construction, an important economic indicator considering how desperately more new homes have been needed. But such a sharp drop may presage something more sinister than a slower pace of building. Home builders were one of the first groups to feel the top of the market cycle just before the Great Recession. In June 2005, NAHB’s index hit 72, its cycle high. It started to tumble the next month, and by mid-2006 stood in contraction territory. To be sure, builders may not be the canary in the coal mine now as they were a decade ago. And many economists have called the top of the housing cycle already. Still, such a sharp drop can only seem ominous. What they’re saying: Moody’s Investors Service on Monday downgraded its outlook on the U.S. building materials industry, saying that “private residential construction growth is decelerating.” Market reaction: All the headwinds that builders have been complaining about may already be baked into big-company stocks. Shares of D.R.Horton, Inc. DHI, -0.79% are down 32% in the year to date, while KB Home KBH, +1.58% shares have lost 41% in that time. marketwatch.com I personally don't think the economy is overheating and inflation is still under control.. The way I see it. Just from what I just posted about my personal AR loan. Homeowners with adjustable rate loans and adjustable home equity loans are seeing increased payments. IMO That makes you want to pay down debt faster. This if your able to with any windfall you might have received from tax cuts or bonuses workers many companies paid out via a lower tax rate. Housing- Based on home-building stocks which have undergone increased expense due to higher commodity cost. The US Housing market is already slowing, increased interest rates are part of the equation. Automotive- IMO that market is already slowing. Credit Card debt- I just love the new TV commercials I've seen about credit card debt.. I can't think of the company name airing them off hand, but they increase awareness about credit card debt. The one I've see. Stating by the time I pay off my credit card debt. I will basically be paying double from my purchase. I've also see similar commercials about student loan refinancing. I also see the new tariffs and purposed new ones slowing the economy and lowering inflation prospects. Oil- OPEC indirectly has to deal with US Oil & Gas independents now. IMO because they are a force now, especially with LNG exports ramping up. I also see the Saudis are upping their Cap-X exposure to natural gas. Petrobras has recently sold oil leases to pay down debt. IMO I see oil going lower down the road and lower food input cost if tariffs are fully imposed. P.S. I believe such factors I mentioned will kick the US economy can down the road. If the IMF is worried about US fiscal policy then maybe they should establish a no tariff world economic forum summit for consideration. If the dollar stays strong. I think you will see more foreign investment in the US market.