Eagerly Anticipating Powell's Q&A

In the wake of last week's strong economic data on Friday and follow-through weakness in overseas markets, traders are gearing up for additional Fed rate hikes.  They figure they can get some sort of comment on those conclusions in a Q&A session with Fed Chair Powell today (previously scheduled) at the Economic Club of Washington.  The event kicks off at 11am and runs through 1:30pm.  There is no scheduled time for Powell, but we've heard 12:30 is a good possibility.  Either way, the entire time frame will warrant vigilance.  In its wake, markets may breath a sigh of relief if Powell doesn't acknowledge Friday's data the same way that a few other Fed speakers have in the past 24 hours. How realistic is it for Powell to have some new reaction to one day's worth of econ data?  Again, other Fed speakers have already acknowledged their surprise.  The clearest example came from Kashkari this morning which we covered in detail in an update you can read HERE. As said in that update, it's particularly notable to see Kashkari's comment on the strength of the housing market causing trouble for the Fed.  This is a concern we've shared time and again with respect to the prospects for any significant rate rally.  We feel the Fed is likely to push back fairly hard against "signs of life" in the housing market due to housing's role in stoking inflationary fires over the past 2 years.  Worst case scenario, it prompts a revision to their plans to abstain from MBS sales for the time being.  We're CERTAINLY not there yet, not expecting it any time soon, nor expecting anyone to bring is up as an option at this stage, but if rates were to continue to fall and housing continued to recover, we don't thing the Fed would have a problem pushing MBS vs Treasury spreads to even wider levels. The following chart shows how MBS yields have fared against a 5/10yr Treasury blended yield for more than a decade.  We had been recovering after blowing out to long-term highs last fall.  At one point in the Bernanke years, we saw such levels as being a concern that the Fed would want to address by HELPING the mortgage market.  With the current realities of inflation, the Fed may view such levels as a safer place to be for now. To be clear, today is not about the mortgage market nor the Fed's mortgage-related intentions.  Kashkari simply made a statement that aligned with a warning we hadn't heard anywhere else and it served as food for future thought--something to keep an eye on if certain scenarios play out.  Today is all about whether Powell is on board with Kashkari's general vibe and/or the general notion that last Friday makes Fed officials say "this changes things..."
http://dlvr.it/Sj3yVF

Comments

Post a Comment

Popular posts from this blog

Get Ready for Smaller, More Affordable Homes Have you been trying to buy a home, but higher mortgage rates and home prices are limiting your options? If so, here’s some good news, smaller, more affordable homes are on the way. In some ways, smaller homes are already here. When the pandemic hit, the meaning of home changed. People needed the space their home provided not only as a place to live, but as a place to work, go to school, exercise, and more. Those who had that space were more likely to keep it. And those that didn’t were in a position where they were trying to sell their smaller house to move up to a larger one. That meant the homes coming to the market during the pandemic were smaller than those on the market before the pandemic – and that trend continues today. Larger homes tend to come on the market during the summer months when households with children who are out of school are looking to move. That seasonality means, based on historical trends and the fact that fall is now approaching, we can expect smaller, more affordable homes to come to the market throughout the rest of the year. What Does This Mean for You? The seasonal trend of smaller homes coming to the market in the later months of the year, coupled with builders bringing smaller, more affordable newly built homes to the market right now, is good news – especially if you’re finding it difficult to afford a home. If a smaller, more affordable home sounds appealing to you, good news – they’re coming. To keep up with what’s available in our area, DM me. #realestate #homeownership #homebuying www.DanFreshley.com

Image
Get Ready for Smaller, More Affordable Homes Have you been trying to buy a home, but higher mortgage rates and home prices are limiting your options? If so, here’s some good news, smaller, more affordable homes are on the way. In some ways, smaller homes are already here. When the pandemic hit, the meaning of home changed. People needed the space their home provided not only as a place to live, but as a place to work, go to school, exercise, and more. Those who had that space were more likely to keep it. And those that didn’t were in a position where they were trying to sell their smaller house to move up to a larger one. That meant the homes coming to the market during the pandemic were smaller than those on the market before the pandemic – and that trend continues today. Larger homes tend to come on the market during the summer months when households with children who are out of school are looking to move. That seasonality means, based on historical trends and the fact that fall ...
Read more

Accounting, Digital, Broker Comp Tools; FHA, VA, USDA Developments; Why Rates are Stubborn

Image
Imagine my surprise at finding tag (like on the playground) is an organized sport. Imagine my surprise at finding two gas stations at the same intersection yesterday in Truckee, California with two different prices for unleaded! Rather than wait for the CFPB to tell me that I could save money by going to the cheapest station, as it did by paying for a study on how different lenders have different mortgage prices, I actually reasoned, all by myself, that I could, and did, buy the least expensive gasoline. Switching gears, but continuing on with the thinking vein, a lot of reasoning went into determining that a) the earth is round, and b) globes are not some newly invented conspiracy theory. Someone needs to let Georgia’s current GOP district chair Kandiss Taylor know globes are globes. What the heck am I missing by subscribing to the round earth concept? And how about this for sensationalist headlines from Auction.com: One-Third of Buyers Expect Home Prices to Decline. Really? “Despite ...
Read more