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Strategies & Market Trends : US Inflation and What To Do About It -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (962)	3/22/2019 11:37:19 AM
From: RetiredNow	Respond to of 1504

Housing has been rolling over for awhile. That's another leg of the table that is collapsing.... ------- US Housing Hits A Brick Wall: "The House Price Deceleration Is Staggering" Submitted by Mark Hanson RedFin puts out a monthly home sales report, which contains a lot of great data. The chart below shows Feb 2018 year-over-year price growth, which was off the charts, compared to Feb 2019 year-over-year growth, which was very weak. This y/y growth deceleration is staggering, especially in the high-flying regions. Very few regions escaped a significant deceleration with some prominent regions like San Jose and San Francisco even getting crushed on a year-over-year absolute basis. The only thing that even comes close to this sharp of deceleration was circa-2007. It was data like these I have been tracking that led to my call last year that there was no way the Fed could continue to hike in 2019. For certain housing and related names, this is a killer unless prices re-accelerate quickly.

To: Real Man who wrote (962)	3/22/2019 3:21:23 PM
From: RetiredNow	Respond to of 1504

Now the 3month and 10 yr just inverted. Don't know if we'll get a 30 yr inversion, but the 3 mo and 10 yr has the best record of predicting recessions. Not good. bloomberg.com ----------- marketwatch.com The yield curve inverted — here are 5 things investors need to know A closely watched measure of the yield curve briefly inverted Friday — with the yield on the 10-year Treasury note falling below the yield on the 3-month T-bill — and rattled the stock market by underlining investor worries over a potential recession. But while that particular measure is indeed a reliable recession indicator, investors may be pushing the panic button prematurely. Here’s a look at what happened and what it might mean for financial markets. What’s the yield curve? The yield curve is a line plotting out yields across maturities. Typically, it slopes upward, with investors demanding more compensation to hold a note or bond for a longer period given the risk of inflation and other uncertainties. An inverted curve can be a source of concern for a variety of reasons: short-term rates could be running high because overly tight monetary policy is slowing the economy, or it could be that investor worries about future economic growth are stoking demand for safe, long-term Treasurys, pushing down long-term rates, note economists at the San Francisco Fed, who have led research into the relationship between the curve and the economy. They noted in an August research paper that, historically, the causation “may have well gone both ways” and that “great caution is therefore warranted in interpreting the predictive evidence.” What just happened? The yield curve has been flattening for some time. On Friday, a global bond rally in the wake of weak eurozone economic data pulled down yields. The 10-year Treasury note yield TMUBMUSD10Y, -3.37% fell as low as 2.42% and remains off nearly 9 basis points at 2.45%, falling below the three-month T-bill yield at 2.455%. Why does it matter? The 3-month/10-year version that is the most reliable signal of future recession, according to researchers at the San Francisco Fed. Inversions of that spread have preceded each of the past seven recessions, including the 2007-2009 contraction, according to the Cleveland Fed. They say it’s offered only two false positives — an inversion in late 1966 and a “very flat” curve in late 1998. Is recession imminent? A recession isn’t a certainty. Some economists have argued that the aftermath of quantitative easing measures that saw global central banks snap up government bonds may have robbed inversions of their reliability as a predictor. Since so many Treasurys are held by central banks, the yield can no longer be seen as market-driven, economist Ryan Sweet of Moody’s Analytics, recently told MarketWatch’s Rex Nutting. Meanwhile, recessions in the past have typically came around a year after an inversion occurred. Data from Bianco Research shows that the 3-month/10-year curve has inverted for 10 straight days six or more times in the last 50 years, with a recession following, on average, 311 days later. Is the stock selloff overdone? The inversion was blamed by analysts for accelerating a stock-market selloff, with the Dow Jones Industrial Average DJIA, -1.25% down around 400 points or 1.5% and the S&P 500 SPX, -1.45% off 1.6%. Some investors argued that until other recession indicators, such as the unemployment rate, start blinking red, it’s probably premature to press the panic button. Also, many analysts see the Fed eager to avoid an inversion of the yield curve, which could prompt policy makers to move from standby mode toward easing mode. “If [the inversion] is sustained and the Fed is not sensitive to that, it could become an issue,” said Ed Campbell, senior portfolio manager at QMA, in an interview.

To: Real Man who wrote (962)	3/27/2019 10:05:52 AM
From: RetiredNow	Respond to of 1504

"Scary Hours" In Bond Market Rocked By "Crazy, Panicky" Moves While some are ignoring the looming economic crunch and instead blame mortgage convexity hedgers for the sharp move lower in yields in the past week which led to the first inversion in the recession signalling 3M-10Y curve since 2007, even as others do their best to talk down the risk of a recession following yield curve inversion, the slide in yields has continued overnight, with the 10Y yield tumbling as low as 2.35% overnight - the lowest since Dec. 2017 - and the curve inversion hitting a new cycle low of 11bps earlier this morning. The reason for the latest flush in rates, according to Nomura's Charlie McElligott, was due to comments in a NYT interview released last night from President Trump’s likely new Fed nominee Stephen Moore who said that the Fed should immediately cut rates 50bps, while ECB’s Draghi and Praet again reiterated dovish guidance on both 1) TLTRO (making it more attractive by “tiering”) and 2) potential for deeper NIRP. As a result, global rates are again "foaming at the mouth" with another leg of “panicky grab,” while risk-assets have been “spooked” by the instability seen in the Rates-trade, with Spooz off 16 handles at their lows from earlier best levels, while FX vol saw some “risk off” flow as well as the Swiss Franc trading at the strongest vs EUR since Jul 2017. For those who missed it, Moore’s interview with the NYT was "full of fireworks", with McElligott's summary below: Moore stated that the Fed should immediately cut rates 50bps“I was really angry” about the Fed’s December hike, Moore told the paper…”I was furious, and Trump was furious too. I just thought that the December rate increase was inexplicable. Commodity prices were already falling dramatically.”Moore believes that the Fed should use an index of commodity price changes to drive interest rate policy decisions, a move which would have seemingly meant Rate hikes in the middle of the 2008 recession, as well as at the beginning of the very nascent 2010 / 2011 expansionMoore is sorry he called for Fed Chair Powell to step-down after the FOMC raised interest rates in December—now instead saying “…hopefully I could work with Powell to get him shifted over to a more pro-growth” policy, LOLMoore too acknowledged that his hyperinflation predictions / criticisms of QE policy during the Obama years were incorrectWhether or not following Moore's "guidance", or just due to rising economic pessimism, the Eurodollar market now sees over 2 full rate cuts by December 2020. “WE WERE…INVERTED”: The move in Rates, which are now pricing-in multiple Fed cuts, has been so profound that the Nomura strategist suggests the Fed’s Kaplan was “rolled-out” to counter the market behavior via comments to the WSJ in an interview piece released at 5:32am EST this morning, stating that it is “too soon” for the Fed to consider cutting rates. So far it has not helped, with the overnight action exacerbated by further "forced-in" moves by the abovementioned MBS convexity hedgers, as swap spreads continue to collapse. “SCARY HOURS” IN 10Y SWAP SPREADS: Meanwhile, as attention focuses on the curve flattening, recall that the time to panic - as Goldman reminded readers yesterday - is when the curve proceeds to re-steepen next, something it has been doing in the 5s30s interval. Commenting on the latest steepening in the 5s30s, earlier touching fresh highs last seen in Nov17, McElligott ascribes this to Fed’s Rosengren stating that he favors shortening the WAM (weighted avg maturity) of the Fed’s UST portfolio This again speaks to the rationale provided behind our recent advocacy of a “Reverse Operation Twist” where the Fed would increase the share of US T-Bills via reinvestment proceeds, which too then later allows flexibility for the Fed to then take the policy step of lengthening the maturing of its B-S the next time a significant economic downturn occurs This public debate on the composition of the B-S is picking-up steam as they follow comments on the topic Monday from both Fed’s Harker and Evans, indicating policy tweaks to the SOMA WAM are increasingly likely in my eyes Summarizing the violent action, here is McElligott's conclusion: "Rates raging” again with an extension of UST- / swap spread- / front-end- / front-end flattener- “stop-ins” again “going off” overnight, with likely “exacerbation” culprits again being “negative convexity” types from MBS- and systematic “short vol” strategies."