Morning Roundup

By Mark Masterson on April 21, 2023

Good morning,

Below are the news items moving markets today:

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Executive Summary:

Happy Friday!

An eclectic Morning Roundup today.

First – a few headlines…..

Looks like folks pulled a lot of money out of money markets.  No doubt it was to pay taxes.

• According to Lipper, money market funds saw outflows of $67.4B in week-ended 19-Apr, the third largest on record.
• However, decline not a read-through for banking sector or broader risk appetite with the focus on the tax payment deadline.

Looks like the banks needed to tap the emergency Fed loan window just a bit.  Most likely it was to cover the deposits that left for tax payments.  The good news is that the Fed emergency lending is still down for five weeks – a sign the banking stress is slowing.

• On the banking front, borrowing from the discount window increased $2.3B to $69.9B, while lending through the BTFP ticked up by $2.1B to $74B.
• However, when including the $10B decline repurchase agreements, Fed emergency lending still down for five straight weeks following the big spike surrounding the SVB failure.

For those of you in the “no-landing” camp, or even the soft landing camp – just look away or don’t look at the next few charts.

The data just keeps pointing to an economic slowdown or recession in our near future.  Over a 6-month timespan, breadth within @Conferenceboard ⁩ LEI continues to look weak … diffusion index continues to hover near recession territory.

Bottom line – when we are at these levels, we tend to see recessions.  (see the red vertical lines….those are recessions)

Liz Ann Sonders 4 21 23

Another one.

Here is where the Philly Fed Manufacturing index Business Outlook is…..It’s never been this low and not had a recession. 

See the vertical gray bars.  Those are recessions.

Rosenberg Research 4 21 23

And those leading economic indicators…….

Again, see where we are in blue, and look at those vertical gray bars.  Draw your own conclusions….but be realistic.

Bespoke.com 4 21 23

I can’t believe some of the policies that come out of Washington these days.

Here is another example….

How the US is subsidizing high-risk homebuyers — at the cost of those with good credit / https://nypost.com/2023/04/16/how-the-us-is-subsidizing-high-risk-homebuyers-at-the-cost-of-those-with-good-credit/

• Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide, from Wells Fargo to JPMorgan Chase, effectively tweaking interest rates paid by the vast majority of homebuyers.
• The result, according to industry pros: pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.
• Starting May 1st, home buyers with a credit score >680 will pay a higher mortgage rate to subsidize the costs for home buyers with a lower credit score
• The new rule appears to punish home buyers with a strong financial position

• 620 Fico score ets a 1.75% fee discount
• 740 fico score or higher gets a 1% fee

Brilliant.

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Articles of Interest:

• Central banks:
  • Philadelphia Fed’s Harker says additional tightening may be needed to ensure policy is restrictive enough (Reuters)
  • Cleveland Fed’s Mester sees end of tightening cycle; Atlanta Fed’s Bostic says still one and done on rate hikes (Bloomberg)
• Economy:
  • Private jet travel demand softening (NY Post)
• Banking:
  • Banks increase emergency borrowings from Fed for first time in five weeks, indicating lingering financial system stresses (Bloomberg)
  • US regional banks stability following SVB collapse may have stopped big outflows but at the cost of shrinking profit margins (FT)
• Geopolitics:
  • Biden set to sign G7-backed executive order restricting investment in parts of China’s economy (Bloomberg)
  • Some of Ukraine’s key allies including US considering outright ban on most exports to Russia (Bloomberg)
• Washington:
  • Biden preparing to announce reelection campaign next week (Washington Post)

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Charts of the day:

Good chart showing the potential in gold should investors decide they need more of it in their portfolios…..

From Jesse Felder….

Currently, investors have little to no interest in owning gold (which is a bullish contrarian sign in my book). As my friend Callum Thomas recently pointed out, assets in gold ETFs like GLD are a tiny fraction of those invested in equity ETFs like SPY. However, there’s a good chance that the deteriorating fiscal situation will over time light a fire under investor appetites for precious metals relative to financial assets, just as it did two decades ago. And that’s exactly the sort of thing that could power another major bull market for the precious metal.

Felder Report / 4 21 23

Update on current mortgage rates…….

Average 30-Year Mortgage Rate in the US…

1970s: 8.9%

1980s: 12.7%

1990s: 8.1%

2000s: 6.3%

2010s: 4.1%

2020s: 4.0%

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All-Time Low (Jan 2021): 2.65%

Today’s Rate: 6.39%

CharlieBilello 4 21 23

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Quote of the day:

A person’s a person, no matter how small

Dr. Seuss