Pending home sales in July fell by 1.8% m/o/m, an unexpected drop after a 2% fall in June. The estimate was for a slight gain of .3%. Only the West saw an increase from June. Stating what we know with the aggressive home price increases that zero rates and QE stoke, the NAR chief economist said "Buyers are still interested and want to own a home, but record high …
A few things of note
While Powell used multiple pages of his speech Friday to argue the transitory inflation path, the TIPS market said not as inflation breakevens rose. The 5 yr was higher by 4 bps and 14 bps for the week and getting back all that was lost in the week prior. While off the highs of May, we are still near 13 year highs. The 10 yr inflation breakeven was also higher by 4 …
Succinct Summation of the Week’s Events – 8/27
Positives 1)Wage gains are now showing up. Private sector wages/salaries rose 1% m/o/m in July after a .9% increase in June, .8% in May, .9% in April and .8% in March. That is a 13% annualized pace. Spending was up by .3% after a 1.1% increase in June. Combining the two puts the savings rate at 9.6% vs 8.8% in June and 9.8% in May. 2)The average 30 yr mortgage …
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Powell just can’t commit yet
Jay Powell was his usual dovish self and is clearly wanting to wait for more information before committing to the timing of tapering even though he hinted it will likely come this year. He also sounds like someone who is campaigning to hold his job in February 2022. To that latter point, he said “We have much ground to cover to reach maximum employment, and time …
5 for 5/Inflation, income & spending
We’re now 5 for 5 as non voting member and Philly Fed president Patrick Harker is a supporter of tapping the brakes on QE and also wants to finish quickly according to an interview with Steve Leisman on CNBC. Harker acknowledged the risks of Delta but also said there are signs that inflation is not so transitory. July headline PCE rose .4% m/o/m and .3% at the …
Now a voting member says let’s get started
We are now 4 for 4 with Fed presidents who are ready to start tapering in October, of course assuming the data satisfies them over the coming month. But this time we have a voting member, Atlanta Fed president Raphael Bostic who told Reuters "I would be comfortable with an October timeline for starting this." And, he is "definitely looking to get this done as quickly …
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3 for 3
So we are now 3 for 3 today with non voting Federal Reserve presidents that believe it is time to start trimming asset purchases. Dallas head Robert Kaplan in an interview with Steve Leisman on CNBC said “Based on everything I’m seeing, I don’t see anything at this point that would cause me to materially change my outlook.” He backed this up by mentioning the Dallas …
Claims/”What is it that we are accomplishing with a balance sheet of this size?”
Initial jobless claims totaled 353k, about in line with the 350k estimate and vs 349k last week. As a print of 399k drops out, the 4 week average fell to 367k from 378k. PUA claims rose by almost 10k w/o/w to 118k. Delayed by a week, continuing claims rose 42k w/o/w to 2.86mm, 90k more than expected but little changed with last week which was revised up by 45k. …
The BoK prioritizes inflation & financial imbalances
Ahead of Jackson Hole, the Bank of Korea decided to prioritize its proper focus on inflation and financial bubbles and unexpectedly hiked interest rates by 25 bps overnight to .75%. With respect to Delta, Governor Lee said citizens are adjusting to this new world. He said "We've decided to put the focus on reducing financial imbalances, and as we raise the rate, we …
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5 yr auction ahead of Powell
After a stellar 2 yr note auction yesterday, today’s 5 yr was on the weaker side. The yield of .831% was about 2 bps above the when issued. The bid to cover of 2.35 was below the one year average of 2.40. The bright spot was that direct and indirect bidders took 80% of the auction vs the 12 month average of 76%. In response, yields across the curve are at the highs of …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.