Free Republic

Wipeout! More tech tantrums. China’s Covid surge. And above all, no central banks riding to the rescue if things go wrong. Reeling from a record $18 trillion wipeout, global stocks must surmount all these hurdles and more if they are to escape a second straight year in the red. With a drop of more than 20% in 2022, the MSCI All-Country World Index is on track for its worst performance since the 2008 crisis, as jumbo interest rate hikes by the Federal Reserve more than doubled 10-year Treasury yields — the rate underpinning global capital costs. And in the US,...

This will be the last time (Fed rate hikes) as the US economy is forecast to either go into a recession in 2023 or slow down to an anemic 1.20% Real GDP YoY. Even the Fed is forecasting 3.10% core inflation in 2023, still higher than their target rate of 2%. Commercial mortgage bonds could get clobbered in the coming months, and investors are backing away from the securities. Some $34 billion of the bonds come due in 2023, and refinancing property loans is difficult now. Property prices could fall 10% to 15% next year, according to JPMorgan Chase &...

Whoop there it is! The US Treasury 10y-2y yield curve descended further into inversion at -82 basis point, the worst since 1981. This is not a good sign, since the 10Y-2Y curve typically inverts just prior to a recession. The current US Treasury curve is currently humped at 1 year, then declining rapidly. The swaps curve is peaking at 9 months, then declining rapidly. The Fed Funds Futures market is pointing to a peak Fed Funds rate of 5% at the May 3rd FOMC meeting. Yes, a recession is headed our way.

MARKET EXTRA The Federal Reserve on Friday confirmed what many investors were saying for some time: the $24 trillion Treasury market has been experiencing low levels of market liquidity in recent months. The central bank has been rapidly increasing interest rates since March as part of a fight to bring inflation down from a 40-year high. The hope has been that such steps can cool consumer demand enough to tame prices, without throwing the economy into a painful recession, or spark a financial crisis. But since May, cracks in liquidity in Treasurys, the biggest, deepest part of the U.S. bond...

US 30-year mortgage rates are above 7% as The Federal Reserve slowly withdraws its Covid-related monetary stimulus and attempt to combat near 40-year highs in inflation under Biden (aka, Bidenflation). However, the US Treasury 10-year yield is down -12 basis points this morning. And we have an important predictor of recession, the Treasury 10yr-3mo yield curve. And if the Republicans win The House (and maybe the Senate) at the midterms, Biden can blame Republicans for the recession. Joe Biden, Hunter and Biden’s brother James must be singing “Damn, it feels good to be a Biden!“

Series I bonds are a nearly risk-free asset whose interest rate resets every six months according to inflation. The new rate is expected to fall to roughly 6.48%...On Thursday alone, users opened 82,000 new TreasuryDirect accounts, and bought $750 million in I bonds.

<p>Profits and losses aren’t usually thought of as a consideration for central banks, but rapidly mounting red ink at the Federal Reserve and many peers risks becoming more than just an accounting oddity.</p><p>The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years.</p>

US Treasuries Yield Curve. An app for exploring historical interest rates.

The global debt market is orders of magnitude larger than the stock market, and debt instruments across the globe have nearly reached the breaking point due to the Fed’s steady increase in interest rates this year (combined with seemingly endless money printing and other disastrous fiscal policies). Because bond values have an inverse relationship with interest rates, as interest rates go up, the value of bonds and other debt instruments already issued goes down. With each Fed rate increase, bond values are cratering, leaving debt investors holding substantial losses and leading to a collapse in the number of potential buyers...

The Bank of England took emergency action on Wednesday to avoid a meltdown in the UK pensions sector, unleashing a £65bn bond-buying programme to stem a crisis in government debt markets. In a nutshell what happened is that a whole lot of UK pensions (technically called liability-driven investment, or LDI funds) failed to appropriately hedge their rate risk - despite it being telegraphed months in advance - and got margin called on billions in gilt securities, forcing them to sell treasuries into a thin market that suddenly froze and turned bidless, creating a "death spiral", and then realizing they were...

News of the bank's action, aimed at "restoring orderly market conditions", had an immediate impact on the rates demanded by investors to hold UK government debt. The Bank of England has launched a temporary bond-buying programme as it takes emergency action to prevent "material risk" to UK financial stability. It revealed that it would buy as many long-dated government bonds as needed between now and 14th October in a bid to stabilise financial markets in the wake of the mayhem that followed the government's mini-budget last Friday. In addition to the plunge in the value of the pound, it has...

Treasury Bond yields have broken a downtrend stretching back to the 1980s.The Fed told us it would be a bad year for Treasury bonds when it announced earlier this year it would reduce the number of bonds held on its balance sheet to help curb inflation. Nevertheless, their poor performance has been jaw-dropping. The 20-year Treasury Bond ETF (TLT) is down 34% from its peak in December, and 2-year Treasury bond yields (yields move inverse to bond prices) have spiked from below 0.80% to 4.3% this year alone. Bonds' rapid decline has caused steep losses for investors who built...

European banks have joined Wall Street in allowing clients to trade Russian debt once again after the US Treasury gave the green light last month for investors to wind down their positions.The global market for Russian sovereign and corporate bonds froze in June after US investors were banned from buying Russian securities on the secondary market as part of the wests sanctions against Moscow following its invasion of Ukraine.

Already gone! Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors. For months, the country found paths around the penalties imposed after the Kremlin’s invasion of Ukraine. But at the end of the day on Sunday, the grace period on about $100 million of snared interest payments due May 27 expired, a deadline considered an event of default if missed. It’s a grim marker in the country’s rapid transformation into an economic, financial and political outcast. The nation’s eurobonds have traded...

I just read that President Biden has never been more optimistic about the US economy than he is now. Well, today’s closing bell is not optimistic and is downright bearish. The US Treasury 10-year yield rose … ANOTHER … 11.3 basis points as rumors circulate that The Fed might actually raise their target rate by 75 basis points. And the venerable Dow (DJIA) is down -152 points today. Markets are anticipating an increase of The Fed Funds target rate from 1% to 1.568%, less than the rumored 75 basis point increase being bandied about. If Biden is wildly optimistic about...

(Reuters) - Benchmark 10-year Treasury yields hit their highest level since 2011 on Monday, and a key part of the yield curve inverted for the first time since April as investors braced for the prospect that the Federal Reserve’s attempts to stem soaring inflation will dent the economy.Yields jumped after data on Friday showed that U.S. consumer prices accelerated in May as gasoline prices hit a record high and the cost of food soared, leading to the largest annual increase in nearly 40-1/2 years.The Fed is expected to hike rates by 50 basis points when it concludes its two-day meeting...

Not nibbling on baby formula, watching gasoline prices soar. Wasting away again in Biden/Powellville. It was closing hell for a terrible day in markets as investors struggle to process the dreadful and seemingly endless inflation report on Friday. What happened today? The NASDAQ tanked -4.58% and the 10-year Treasury yield jumped 22.2 basis points. Gulp. The 22.2 bps jump in the 10-year Treasury yield has led to Agency MBS prices pulling a Titanic and sank. Somehow, I don’t think that Biden and Congress are going to help the middle class and low-wage workers.

Today’s opening bell is “Opening Hell!” US Treasury 10Y yields are up +12.1 basis points as of 9:40am EST. And rising across the globe. Equity markets? Dow is down -621.93 points and the NASDAQ is down almost -3%. But equity markets are down across the globe. Commodities? Once again, all commodities in the red except corn (which I don’t eat) and natural gas. Speaking of opening hell. The US Treasury 10Y-2Y yield flattened to 7 basis points. Markets are in a “Sea of Red.”

Yep, we went there and unleashed the ‘deer in headlights’ image… While most blinkered investors ignored last week’s record surge in revolving consumer credit (i.e. credit card spending), this week’s Walmart and Target earnings brought it home to the rest of the country that the “American consumer is strong” or “consumer has best balance sheet ever” narrative imploded, crashing on the shores of a gigantically lopsided and divided national aggregate that hides the reality that most of America is unable to pay the ‘cost of living’ under Bidenomics 40-year-high inflation without resorting to the plastic. Additionally, we are hearing more...

If you’re eyeing ways to fight swelling prices, I bonds, an inflation-protected and nearly risk-free asset, may now be even more appealing.I bonds are paying a 9.62% annual rate through October 2022, the highest yield since being introduced in 1998, the U.S. Department of the Treasury announced Monday.The hike is based on the March consumer price index data, with annual inflation growing by 8.5%, the U.S. Department of Labor reported.