Morning Report: Hot CPI spooks the bond market

Vital Statistics:

 LastChange
S&P futures4,117-28.8
Oil (WTI)66.210.97
10 year government bond yield 1.65%
30 year fixed rate mortgage 3.13%

Stocks are lower this morning as the global stock sell-off continues. Bonds and MBS are down.

Inflation at the consumer level rose 0.8% month-over-month and 4.2% on a year-over-year basis. The index for used autos and trucks supposedly drove the increase. The index for food at home (in other words groceries) rose 0.4% MOM and 1.2% YOY. Energy fell 0.1% MOM but is up 25% on a YOY basis. It is unfortunate that COVID shutdowns are messing with the YOY numbers just when inflation data matters more than ever. Bond prices sold off on the report, with the 10 year bond yield rising to 1.65%.

Mortgage Applications rose 2.1% last week as purchases rose 1% and refis rose 3%. “Mortgage rates fell last week to the lowest levels since February, tracking the dip in Treasury yields,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The decline in rates helped the refinance index reach its highest level in eight weeks, driven by a 4 percent increase in conventional refinances. Additionally, refinance loan balances increased for the fourth straight week, an indication that higher-balance borrowers acted to take quick advantage of lower rates.”

United Wholesale reported first quarter earnings, however the forward margin guidance is worrisome. In the first quarter of 2021, gain on sale margin came in at 219 basis points. Second quarter margins are expected to fall to a range of 75 – 110 basis points. CEO Matt Ishbia said: “We welcome the shift to more of a purchase market and the pressure on margins as we believe our business model is built to outperform competitors under those conditions.” Rocket forecasted a big decrease in margins as well, although nothing similar to this. It feels like we are in for a rematch of the Great Detroit Price War of 2019.

Job openings hit a record high of 8.1 million in March, according to the JOLTs survey. The quits rate was flat at 2.4 million.

Back to the Consumer Price Index. FWIW, I find the grocery number hard to reconcile with the steep climb in agricultural prices. Commodity prices are up big over the past year.

Front-month corn:

Front-month wheat

Front-month pork

Back in the mid ’00s, we saw many funds begin to treat commodity products as an asset class in of itself and they would buy futures contracts and hold them as a way to fight off the effect of lower interest rates. I wonder if the same thing is happening now.

20 Responses

  1. Thanks, NPR!

    No, You Are Not Imagining It. Prices For A Lot Of Things Did Jump In April

    https://www.npr.org/2021/05/12/995979620/no-you-are-not-imagining-it-prices-for-a-lot-of-things-did-jump-in-april

    Like

    • Greenwald has a better take:

      Like

    • Liz Cheney is beginning to sounds like she could write for Daily Kos.

      We cannot both embrace the Big Lie and embrace the Constitution, and going forward, the nation needs a strong Republican Party.

      I’m really tired to the new thing where people are constantly referring to whatever they think is a lie as The Big Lie, instead of just referring to the claim they believe is false. She means you can’t believe the election was stolen and embrace the constitution–just say that.

      Also, you can 100% believe the election was stolen and embrace the constitution. The two are not incompatible.

      The nation needs a party that is based upon fundamental principles of conservatism, and I am committed and dedicated to ensuring that that’s how this party goes forward, and I plan to lead the fight to do that.

      Tired of political-speak. This is no different that Biden talking about how he’s creating more jobs and growing the economy and will make the world a better place–or any other politician. These aren’t plans. These aren’t policies. What are you going to do to make that happen, other than attack and offend the largest amount of voters the Republicans have gotten in an election since Reagan in 84? She is so full of crap. Not that they all aren’t be I’m finding her particularly irritating recently.

      I think that it is an indication of where the Republican Party is, and I think that the party is in a place that we’ve got to bring it back from, and we’ve got to get back to a position where we are a party that can fight for conservative principles, that can fight for substance. We cannot be dragged backward by the very dangerous lies of a former president.

      I like how she refers to “a former president” when what she really means is “the majority of Republicans”, and also, of course, working-class peasants who shouldn’t really have anything to say about anything.

      members of her party broadcast their disapproval by leaving the chamber

      What is congress, high school? If there was an election option to literally kick everyone in congress out and replace them by randomly selected citizens, like pulling a jury, I’d vote for that option. They are all so worthless.

      “Today we face a threat America has never seen before,” Cheney said Tuesday evening. “A former president, who provoked a violent attack on this capital in an effort to steal the election, has resumed his aggressive effort to convince Americans that the election was stolen from him. He risks inciting further violence. Millions of Americans have been misled by the former president, they have heard only his words, but not the truth. As he continues to undermine our democratic process, sowing seeds of doubt about whether democracy really works at all.”

      I can see why Daily Kos likes her.

      A: she says that Trump directly provoked the attack. Which is not something that can be factually asserted. He didn’t help. His choice of words . . . was bad. If he wanted a loud protest outside the capitol so that congress new he had fervent supporters, he should have said so. He admonished his supporters to be peaceful and law-abiding like once. He could have done better. Still doesn’t mean “he provoked” the attack. Nor that he bears sole responsibility, even if he does bear some. There were (never mentioned by folks like Cheney), antifa types in the crowd, egging on the proceedings. There’s plenty of video. There was a lot of internet chatter between antifa types about wearing MAGA hats and what not so they could infiltrate the protests. With clearly no intent to be supportive of Trump, so the could bear some responsibility. Someone wanted the capitol police to let at least some of the protesters into the capitol–some responsibility there. Security for the protest was limited–so there’s some responsiblity there.

      B: She was that because Trump has a disagreeable or wrong opinion, he risks inciting further violence–although I’d argue she’s really only worried about violence to her career, and may be looking at how she can go the Jen Rubin route and “see the light” that the progressive left is right about everything, so long as they also like endless wars. But anyway: this whole thing that people having unpopular opinions and expressing them being a risk for violence and being something that “undermines our democratic process” and sowing seeds of doubt about whether democracy really works at all . . . I mean, ugh. There are ways to distance yourself from Trump without going full TDS and shitting on the 74 million people that voted for Trump.

      “I am a conservative Republican, and the most conservative of conservative principles is reverence for the rule of law,” she continued. “The Electoral College has voted. More than 60 state and federal courts, including multiple judges the former president appointed, have rejected his claims. The Trump Department of Justice investigated the former president’s claims of widespread fraud and found no evidence to support them. The election is over. That is the rule of law. That is our constitutional process. Those who refuse to accept the rulings of our courts are at war with the Constitution. Our duty is clear. Every one of us who has sworn the oath must act to prevent the unraveling of our democracy.”

      Why is she litigating this, repeatedly? And loudly? And so very publicly? Aside from Trump and angry right-wingers on Gab, who is suggesting the Biden election should get overturned? I don’t follow the connection from “reverence for rule of law” (there are so many much better examples of “rule of law” being ignored on the left, right now. Is she going after any of them?) to “Trump saying he thinks the election was stolen should not be allowed because of rule of law”. I don’t understand why consenting that Biden is president, the electors voted, and it’s over . . . means that you also are required to change your opinion, or never speak your opinion, or never question anything that seems weird to you about the election, or you are not supporting “the rule of law”.

      Believing there may have been an unusual amount of voter fraud in key states this time around is not the same as believing that Biden should be ejected from office or that Trump should be installed. IMO.

      And again, who is she talking to? Presumably no the 74 million Trump voters. So basically the, what, 10 million or so white males that decided not to vote for Trump in 2020? That’s her entire audience now?

      And what does it mean, “those who refuse to accept the rulings of our courts are at war with the Constitution”? You mean, if we appeal a court decision, then we are at war with the constitution? Or that if we disagree with the outcome of a court case, we are at war with the constitution? I don’t feel like her “conservatism” is all that serious. IMO.

      And “prevent the unraveling of our democracy”–how? By preventing Trump from ever being elected again? By preventing him from speaking? There’s a lot of need for more specifics here.

      I’m not in a position to vote against her in any capacity, but if I ever was (say, in a primary) I certainly would. But she doesn’t live in my state. 😉

      Like

  2. The new guys nail it again:

    “How Elites Co-opt Asian Suffering
    A new $250 million foundation is the latest example of opportunism.

    Zaid Jilani

    Poor people (many of whom are Asian, but most of whom are not) aren’t getting beat up and killed in American streets because we aren’t seeing Lisa Ling enough on TV. People are being beat up and killed because there aren’t enough people out there on the street protecting them.”

    https://www.inquiremore.com/p/how-elites-co-opt-asian-suffering

    Liked by 1 person

  3. The non-crazy version of the lab theory of COVID.

    https://nicholaswade.medium.com/origin-of-covid-following-the-clues-6f03564c038

    Like

  4. Perhaps the whole point of COVID hysteria was just to expand police powers. And seeing what they could get away with.

    https://mtracey.substack.com/p/new-documents-show-police-charged?token=eyJ1c2VyX2lkIjo4NTc0NzI2LCJwb3N0X2lkIjozNjMzNjc2MCwiXyI6ImlqVWlBIiwiaWF0IjoxNjIwODQzODgxLCJleHAiOjE2MjA4NDc0ODEsImlzcyI6InB1Yi0zMDMxODgiLCJzdWIiOiJwb3N0LXJlYWN0aW9uIn0.z98uLj1_YWcAMcsENTMd8lRkotuHNrzhONeuJtJJuTs

    One of the statutes they cited to bust people, APP. A:9-49(A), is defined as:

    Commit[ing] any unauthorized or otherwise unlawful act during the threat or imminence of danger in any emergency that jeopardizes the health, welfare and safety of the people

    Here are some examples of “unauthorized or otherwise unlawful acts” which allegedly contributed to “jeopardiz[ing] the health, welfare, and safety of the people” that police accused people of committing:

    • Sitting in park
    • Sitting and talking to others
    • Sitting on milk crate
    • Visiting with no legitimate purpose
    • Hanging out
    • Being in the street in the company of another
    • In street in the company of others
    • Sitting on bench smoking
    • Encouraging others to not social distance
    • Standing outside enjoying the weather
    • Socializing with another
    • Not Social Distancing
    • Standing without mask

    These violations are punishable by up to six months in prison and a fine of $1,000.

    On April 16, 2020, a woman was charged by police with violating another statute, 2C:24-7.1A1, defined as “recklessly engag[ing] in conduct which creates a substantial risk of bodily injury to another person.”

    Her violation was described by police as: “did knowingly endanger other citizens by no having a face mask as per governor executive order to have one to quell the high rate of covid-19 exposure.” [All typos in these descriptions are police errors]

    A lot scarier to me than the possibility I might get COVID and get hospitalized or die, honestly. I would rather take that risk. Personally.

    Like

  5. This made me laugh.

    Like

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