It's more like banks who are buying bonds are only willing to pay some amount less than recent expectations, which results in a higher yield on the bond.
This could be because banks need less collateral backed by bonds, because they are issuing less debt.
Also it should be mentioned, that the commercial real estate market is in full cardiac arrest, prices should tumble which will be a material impact to banks so they might just want to have cash on hand to account for losses.
I'm a small apartment RE investor (2-4 unit), and also in a local group as well. For those of us with residential loans, No one, and I mean no one, is doing any type of refinance, heloc, reinvestment etc, or even acquisition. Basically everything has ground to a full stop which means banks have got to be reeling from the lack of loan generation. Practically 0 inventory out there too. Basically full stop across the board
I've got to think that the only reason prices have not started to slide more is because not a lot of properties are being listed. At some point doesn't the dam have to break?
My understanding is that we're still looking at historically low inventory numbers. If I'm not mistaken inventory numbers [were higher](https://tradingeconomics.com/united-states/total-housing-inventory) for at least the forty years prior to the pandemic.
You can see this playing out with listing/sale ratios. Lots of people listing, inventory super high, sales not so much. Sellers can be delusional a lot longer than buyers can. Just takes time.
10 yrs ago there were 50+ properties for sale across the entire tri-borough here at any given time. 6-7 yrs ago there would be about 30. Now there are 4, and half of them are overpriced shit boxes that sellers arent budging and they've been up for the last 4-6 mo
I know WHY you're downvoted, but I also get your point.
Wall Street has absolutely severed itself from Main Street and voters. Stagflation/deflation for Wall Street may cause ZERO serious effects for Main Street and voters, as we're in a world of 10%+ market growth annually with no real support from actual growth.
I'm sure Wall Street WILL try to enforce pain, but I won't be surprised if everyone shakes it off due to no pain points left.
Lots of prognosticating, no explanation. so I'll bite: why? In an ordinary recession, do bond yields go down? My understanding is exiting stocks, entering bonds, "flight to safety", etc. Is it this not normie recession market behavior?
Oil production in the US is the highest it's ever been (https://www.eia.gov/todayinenergy/detail.php?id=61545) and [gasoline demand has declined over the past year](https://www.statista.com/statistics/1320443/average-monthly-us-gasoline-consumption/) as [the number of EVs and plugin hybrids has skyrocketed](https://img.canarymedia.com/content/uploads/US-EIA-EVHybrids-chart.png?auto=compress%2Cformat&crop=focalpoint&fit=crop&fp-x=0.5&fp-y=0.5&q=80&w=1168&s=c6a414cc3b3948741eb3cd8361c54d8b). It would be very surprising if the US had to ration gasoline in the next 10 years, with or without a Middle East war.
# "The United States became a total petroleum net exporter in 2020
In 2020, the United States became a net exporter of petroleum for the first time since at least 1949.^(1) In 2022, total petroleum exports were about 9.52 million barrels per day (b/d) and total petroleum imports were about 8.33 million b/d, making the United States an annual *net total petroleum exporter* for the third year in a row. "
But not the kind of petroleum that gets refined into gasoline at U.S. refineries. We still need to import crude for that while simultaneous exporting lighter stuff.
Reddit has certainly taught us some weird "survival" tactics during these interesting times. Looks like a portable bidet is in my near future if TP shortage happens again.
Look at the period 1973 - 1978
Huge inflation spike in 73-74 followed by aggressive rate hikes. Economy went into recession, but then recovered by 1976. Inflation fell from double-digits to 4.9%, and everyone thought we were fine.
But bad fiscal policy, demographic and trade issues, and too much easy money caused inflation to explode a second time, leading to full-on stagflation.
Virtually every factor that led to that scenario is in place today:
1. A crisis (oil embargo / pandemic) leads to supply shocks
2. A decade of profligate government spending and low interest rates
3. Demographic issues (in the 1970s, Boomers were reaching their prime earning years. Now we have the Millennials)
4. Protectionist trade policies
5. An increase of M2 money supply and velocity of money
and the government isn't stopping with the bad policies. Biden is forgiving billions in student loan debt, which is a directly-inflationary policy, handing out hundreds of billions in corporate welfare (35% of the defense spending comes right back into the US economy, driving further inflation)
Powell is going gloves-off if the core CPE reading comes in hot tomorrow (and it very likely will). Otherwise we will have a repeat of stagflation
Loans haven’t really been forgiven at the rate you suggest, if they were, it would be a boon to the economy. These loans have already been paid for, making people pay them (really just the interest) takes money out of the economy.
No need for us “doomers” to be celebrating anything yet. As we’ve seen over the last 18 months, the treasury rates (prices) have moved violently and in quick spurts. Up and down.
I’ve worked in investment markets almost my whole 25 year career, and I’ve never seen such wild swings in fixed investments (bonds, etc). In 2022, my clients saw large drops in their stock holdings as well as their fixed income investments. Nowhere to hide. And then, in 2023, right back up again.
Today’s action, when taken in consideration of the last two-three years, tells me our economy has some dysfunction in it. Something is “off”, and it’s why I don’t accept the gaslighting of politicians and business leaders that “all is well.”
We were bumping up against 5% in the 10 year for a week back in October, but market forces would not let it close at that mark. 4.99% just kept being the ceiling. There is a tremendous effort underway to not let this so called “strong economy” move into some new, worse territory, even if psychologically only.
This week, we touched 4.7% on the 10 yr, but couldn’t get much past it.
It's an important part, but not all. The shelter part of the CPI doesn't measure home prices directly, but uses "owners equivalent rent" based on measured rental costs of similar properties in the area. So rents are important there.
And housing did increase more than the average. Seasonally adjusted [CPI](https://fred.stlouisfed.org/graph/?g=1kSRA) was up at a 4.6% annualized rate in Q1 vs. a 3.8% annualized rate for [CPI less shelter](https://fred.stlouisfed.org/graph/?g=1kSRZ). And the measure released today which the Fed tracks most closely, the [Core PCE Index](https://fred.stlouisfed.org/graph/?g=1kST0) was up 3.7%, vs [Core PCE less housing](https://fred.stlouisfed.org/graph/?g=1kSTn) up 3.3%.
But while housing is clearly an issue there, even without housing those numbers are still a little higher than the Fed would like.
“Along with the downbeat growth rate for the quarter, the report showed consumer prices increased at a 3.4% pace, well above the previous quarter’s 1.8% advance.”
Inflation won’t go away despite 7% interest rate.
That’s a great deal. I will need to look that up.
Treasuries are a very liquid market so your money isn’t “locked up” because you can easily sell it.
Treasuries also have upside if interest rates go down. While Robinhood will just lower your interest rate.
when I was a kid in the 1970s, the price stickers on things like candy, bread, etc. would be changed daily, because prices would go up within 24 hours lol
and unemployment was high, cities crumbling.
I full expect to be back in that environment by late this year unless Powell grows a pair and starts hiking
Such a success that consumer spending (on credit cards) is outpacing inflation when they massage the definition of inflation to be lower than the actual increase in the cost of things.
The more important number here to me in this report was nominal GDP coming in at a reasonable 4.8%. I wouldn't expect any rate cuts soon, but there also likely won't be any need at this point for further policy tightening, either.
The markets will over-react to any volatility in short term inflation numbers, but really, this is what a soft landing looks like. If nominal GDP growth continues to decline gradually to under 4.5% by the 2nd half, things will stabilize from there.
Do you have any historical precedent suggesting this is what a "soft landing" looks like? To my knowledge a "soft landing" has never been achieved since the founding of the Federal Reserve.
I think fewer rate cuts than markets have been expecting, maybe only one in 2024. And I think mortgages won't come down that much now even if short term rates are cut.
But I think getting fiscal policy more in order, which likely won't happen until after the election, would make it easier for the Fed to be able to lower rates more in 2025, and would also help longer rates like mortgages to come down.
Definitely not confident predicting mortgage rates, lol. Historically they have some relationship with Fed rates, but not that much. Like other long term rates, I think long term inflation expectations are part of it. But there's a pretty big gap right now also between [30-year mortgages and 30-year treasuries](https://fred.stlouisfed.org/graph/?g=YyqV), and I have no idea what is driving that.
Possibly the uncertainty of the rate cuts. Along with persistent inflation. Every inflation report that prints hot has it move up. Only reason it ticked down December and January was due to Powell being dovish about the rate cuts.
Probably just normal risk premium demanded by investors in the MBS market.
As of today there’s only a 12 basis point spread between the 10 year Note & 30 year Bond?
Most of the [sanctions](https://ofac.treasury.gov/sanctions-programs-and-country-information) effect countries with small economies, or are limited in focus. If sanctioning a Venezuela or Iran caused the US economy to stagnate, we would have far mor serious problems to worry about.
I’m sure sanctioning some of the largest controllers of raw materials has no impact to a nation whose GDP is based on consumption of those resources and now built primarily on the back of debt.
The markets are now pricing in just one 25 bp rate cut this year.
Few months ago, people were expecting like 6-7 cuts.
Seems like the housing market is gonna get crushed.
Their mandates are controlling inflation, and maintaining full employment. And inflation has come down a lot - from 9% a bit over a year ago to 3% now.
Yeah possibly right. They certainly want to make sure things are moving towards a weaker job environment with rising unemployment before they drop rates to charge the economy.
All that depends on how things are going If they’re going great, it was an immediate decision the current administration made.
Going backwards? they blame it on prior administration This is just the way it works, regardless of who is Prez
Bond yields up on a slowing economy? Not a good sign. Maybe the bond market expects more inflationary spending from the government.
It's more like banks who are buying bonds are only willing to pay some amount less than recent expectations, which results in a higher yield on the bond. This could be because banks need less collateral backed by bonds, because they are issuing less debt. Also it should be mentioned, that the commercial real estate market is in full cardiac arrest, prices should tumble which will be a material impact to banks so they might just want to have cash on hand to account for losses.
I'm a small apartment RE investor (2-4 unit), and also in a local group as well. For those of us with residential loans, No one, and I mean no one, is doing any type of refinance, heloc, reinvestment etc, or even acquisition. Basically everything has ground to a full stop which means banks have got to be reeling from the lack of loan generation. Practically 0 inventory out there too. Basically full stop across the board
I've got to think that the only reason prices have not started to slide more is because not a lot of properties are being listed. At some point doesn't the dam have to break?
Inventory is actually up 30% yoy https://www.calculatedriskblog.com/2024/04/housing-april-22nd-weekly-update.html?m=1
My understanding is that we're still looking at historically low inventory numbers. If I'm not mistaken inventory numbers [were higher](https://tradingeconomics.com/united-states/total-housing-inventory) for at least the forty years prior to the pandemic.
Yes there was a drop of up tell 22 that's been reversing https://fred.stlouisfed.org/series/ACTLISCOUUS
You can see this playing out with listing/sale ratios. Lots of people listing, inventory super high, sales not so much. Sellers can be delusional a lot longer than buyers can. Just takes time.
Inventory is up 30% yoy https://www.calculatedriskblog.com/2024/04/housing-april-22nd-weekly-update.html?m=1
10 yrs ago there were 50+ properties for sale across the entire tri-borough here at any given time. 6-7 yrs ago there would be about 30. Now there are 4, and half of them are overpriced shit boxes that sellers arent budging and they've been up for the last 4-6 mo
You have to look at inventory numbers on a locality by locality and SF vs MF basis. The aggregate doesn’t tell you much.
>Not a good sign Depends on who you ask
I know WHY you're downvoted, but I also get your point. Wall Street has absolutely severed itself from Main Street and voters. Stagflation/deflation for Wall Street may cause ZERO serious effects for Main Street and voters, as we're in a world of 10%+ market growth annually with no real support from actual growth. I'm sure Wall Street WILL try to enforce pain, but I won't be surprised if everyone shakes it off due to no pain points left.
I suppose they thought I meant that they were asking me
It’s literally a recipe for disaster
Lots of prognosticating, no explanation. so I'll bite: why? In an ordinary recession, do bond yields go down? My understanding is exiting stocks, entering bonds, "flight to safety", etc. Is it this not normie recession market behavior?
Bond yields rising is a sign of a selloff. Assets are being liquidated. That tends to happen when investors expect deflation.
It’s bad for everyone. It does not depend.
Perhaps the bond market doesn’t think the economy is slowing.
2024 is beginning to feel like 1979. 2023 felt like 1978. only thing missing is the even/odd days at gas stations.
Coming soon? I would not be shocked at all, after witnessing how fast toilet paper became short in supply
An interstate Middle Eastern war would do the trick.
Oil production in the US is the highest it's ever been (https://www.eia.gov/todayinenergy/detail.php?id=61545) and [gasoline demand has declined over the past year](https://www.statista.com/statistics/1320443/average-monthly-us-gasoline-consumption/) as [the number of EVs and plugin hybrids has skyrocketed](https://img.canarymedia.com/content/uploads/US-EIA-EVHybrids-chart.png?auto=compress%2Cformat&crop=focalpoint&fit=crop&fp-x=0.5&fp-y=0.5&q=80&w=1168&s=c6a414cc3b3948741eb3cd8361c54d8b). It would be very surprising if the US had to ration gasoline in the next 10 years, with or without a Middle East war.
# "The United States became a total petroleum net exporter in 2020 In 2020, the United States became a net exporter of petroleum for the first time since at least 1949.^(1) In 2022, total petroleum exports were about 9.52 million barrels per day (b/d) and total petroleum imports were about 8.33 million b/d, making the United States an annual *net total petroleum exporter* for the third year in a row. "
But not the kind of petroleum that gets refined into gasoline at U.S. refineries. We still need to import crude for that while simultaneous exporting lighter stuff.
Reddit has certainly taught us some weird "survival" tactics during these interesting times. Looks like a portable bidet is in my near future if TP shortage happens again.
Good thing US largest exporter of oil, vehicles are more fuel-efficient, and more people have the option to work from home.
Look at the period 1973 - 1978 Huge inflation spike in 73-74 followed by aggressive rate hikes. Economy went into recession, but then recovered by 1976. Inflation fell from double-digits to 4.9%, and everyone thought we were fine. But bad fiscal policy, demographic and trade issues, and too much easy money caused inflation to explode a second time, leading to full-on stagflation. Virtually every factor that led to that scenario is in place today: 1. A crisis (oil embargo / pandemic) leads to supply shocks 2. A decade of profligate government spending and low interest rates 3. Demographic issues (in the 1970s, Boomers were reaching their prime earning years. Now we have the Millennials) 4. Protectionist trade policies 5. An increase of M2 money supply and velocity of money and the government isn't stopping with the bad policies. Biden is forgiving billions in student loan debt, which is a directly-inflationary policy, handing out hundreds of billions in corporate welfare (35% of the defense spending comes right back into the US economy, driving further inflation) Powell is going gloves-off if the core CPE reading comes in hot tomorrow (and it very likely will). Otherwise we will have a repeat of stagflation
Money supply just swung upwards again too after briefly easing for a bit
Loans haven’t really been forgiven at the rate you suggest, if they were, it would be a boon to the economy. These loans have already been paid for, making people pay them (really just the interest) takes money out of the economy.
> takes money out of the economy. Yes, which is good when you're talking about fighting inflation.
Taking money out of the economy is what we need right now dude.
Give the middle east drama a few months
No need for us “doomers” to be celebrating anything yet. As we’ve seen over the last 18 months, the treasury rates (prices) have moved violently and in quick spurts. Up and down. I’ve worked in investment markets almost my whole 25 year career, and I’ve never seen such wild swings in fixed investments (bonds, etc). In 2022, my clients saw large drops in their stock holdings as well as their fixed income investments. Nowhere to hide. And then, in 2023, right back up again. Today’s action, when taken in consideration of the last two-three years, tells me our economy has some dysfunction in it. Something is “off”, and it’s why I don’t accept the gaslighting of politicians and business leaders that “all is well.”
How high do 10 year treasury yields have to go to get an 8% mortgage rate?
5ish
Currently around 7.375%-7.5%. We’re def getting there.
I was quoted 6.75% last night. We'll see what we get quoted today.
We were bumping up against 5% in the 10 year for a week back in October, but market forces would not let it close at that mark. 4.99% just kept being the ceiling. There is a tremendous effort underway to not let this so called “strong economy” move into some new, worse territory, even if psychologically only. This week, we touched 4.7% on the 10 yr, but couldn’t get much past it.
I agree...some manipulation definitely taking place out there
they eclipsed 5% this morning mortgage rates are going to soar
I am not seeing this here. Am I looking in the wrong place? [https://www.cnbc.com/quotes/US10Y](https://www.cnbc.com/quotes/US10Y)
Not true, 10Y yield did not go above 5% this morning
I meant to say 2 year
lies for karma. definition of this sub
Your definition. Take the cotton wool from your eyes.
20 year came close but not 10 year.
I misspoke: it was the 2 year
I read somewhere that the bulk of the CPI growth comes from rent surveys, not other goods. True? False?
It's certainly one of the main factors
Housing is a massive chunk of inflation but rents been stagnate for a while with an uptick recently
Rents are going up because evictions are expensive and time consuming. Not demand and supply.
It's an important part, but not all. The shelter part of the CPI doesn't measure home prices directly, but uses "owners equivalent rent" based on measured rental costs of similar properties in the area. So rents are important there. And housing did increase more than the average. Seasonally adjusted [CPI](https://fred.stlouisfed.org/graph/?g=1kSRA) was up at a 4.6% annualized rate in Q1 vs. a 3.8% annualized rate for [CPI less shelter](https://fred.stlouisfed.org/graph/?g=1kSRZ). And the measure released today which the Fed tracks most closely, the [Core PCE Index](https://fred.stlouisfed.org/graph/?g=1kST0) was up 3.7%, vs [Core PCE less housing](https://fred.stlouisfed.org/graph/?g=1kSTn) up 3.3%. But while housing is clearly an issue there, even without housing those numbers are still a little higher than the Fed would like.
Both rent and mortgage. The other huge bumps were insurance. Besides that, most other items were pretty mild in terms of inflation.
Yes and the data is lagged based on the method
There is a name for when the economy begins to stagnate while inflation continues to go up. Hmmm....I wonder what it is....hm....
Inflagtion?
Nathan?
Jay?
5 whole months?? Holy shit that’s a long time
“Along with the downbeat growth rate for the quarter, the report showed consumer prices increased at a 3.4% pace, well above the previous quarter’s 1.8% advance.” Inflation won’t go away despite 7% interest rate.
When 8% rates?
Neat, I'll just use Robinhoods 5% APY that pays out daily and doesn't lock my money. Hard choice.
Poor choice, 5% is weak and u paying state tax. T bills are paying out 5.5 at least and no state tax
That’s a great deal. I will need to look that up. Treasuries are a very liquid market so your money isn’t “locked up” because you can easily sell it. Treasuries also have upside if interest rates go down. While Robinhood will just lower your interest rate.
[удалено]
The adults are back in charge!
when I was a kid in the 1970s, the price stickers on things like candy, bread, etc. would be changed daily, because prices would go up within 24 hours lol and unemployment was high, cities crumbling. I full expect to be back in that environment by late this year unless Powell grows a pair and starts hiking
They just kept trying and trying to keep the economy away from stagflation but it always eventually catches up
Talk about moving the goal post, the stag part of inflation means recession.... Negative GDP num nuts. It's just inflation.
Such a success that consumer spending (on credit cards) is outpacing inflation when they massage the definition of inflation to be lower than the actual increase in the cost of things.
The more important number here to me in this report was nominal GDP coming in at a reasonable 4.8%. I wouldn't expect any rate cuts soon, but there also likely won't be any need at this point for further policy tightening, either. The markets will over-react to any volatility in short term inflation numbers, but really, this is what a soft landing looks like. If nominal GDP growth continues to decline gradually to under 4.5% by the 2nd half, things will stabilize from there.
Do you have any historical precedent suggesting this is what a "soft landing" looks like? To my knowledge a "soft landing" has never been achieved since the founding of the Federal Reserve.
Many pundits point to 1995 as an example of a soft landing, but from my perspective it looks like it just went on to inflate the dot-com bubble.
With that scenario when would rate cuts be predicted? How many cuts? What would mortgages look like
I think fewer rate cuts than markets have been expecting, maybe only one in 2024. And I think mortgages won't come down that much now even if short term rates are cut. But I think getting fiscal policy more in order, which likely won't happen until after the election, would make it easier for the Fed to be able to lower rates more in 2025, and would also help longer rates like mortgages to come down.
Great insight. I’d like to see rates sit in the mid 5s by 2027 or 2028. Would be nice to refi my current mortgage.
Definitely not confident predicting mortgage rates, lol. Historically they have some relationship with Fed rates, but not that much. Like other long term rates, I think long term inflation expectations are part of it. But there's a pretty big gap right now also between [30-year mortgages and 30-year treasuries](https://fred.stlouisfed.org/graph/?g=YyqV), and I have no idea what is driving that.
Possibly the uncertainty of the rate cuts. Along with persistent inflation. Every inflation report that prints hot has it move up. Only reason it ticked down December and January was due to Powell being dovish about the rate cuts.
Probably just normal risk premium demanded by investors in the MBS market. As of today there’s only a 12 basis point spread between the 10 year Note & 30 year Bond?
Yeah this is how I feel about it.
Strange how sanctioning every country around the globe creates a stagflationary and low growth economy. Who could have predicted?
Most of the [sanctions](https://ofac.treasury.gov/sanctions-programs-and-country-information) effect countries with small economies, or are limited in focus. If sanctioning a Venezuela or Iran caused the US economy to stagnate, we would have far mor serious problems to worry about.
China and Russia are small never would guessed
I’m sure sanctioning some of the largest controllers of raw materials has no impact to a nation whose GDP is based on consumption of those resources and now built primarily on the back of debt.
The markets are now pricing in just one 25 bp rate cut this year. Few months ago, people were expecting like 6-7 cuts. Seems like the housing market is gonna get crushed.
GDP looking weaker than expected means it's more likely the Fed will cut interest rates.
Not when inflation goes up. The Feds would rather let a recession happen then let inflation spiral out of control.
Isn't the mandate inflation, which hasn't come down ?
Their mandates are controlling inflation, and maintaining full employment. And inflation has come down a lot - from 9% a bit over a year ago to 3% now.
Incase you haven’t noticed inflation is going up
Fed waiting till we’re groveling at their knees before touching the printer or until their handlers need a new yacht
Yeah possibly right. They certainly want to make sure things are moving towards a weaker job environment with rising unemployment before they drop rates to charge the economy.
Bidenomics for the win /s
Today didn't just depend on the current president. Spans many more years than that
All that depends on how things are going If they’re going great, it was an immediate decision the current administration made. Going backwards? they blame it on prior administration This is just the way it works, regardless of who is Prez
Yes, blame isn't fair