Treasuries Soar in Yield Asian Time as NZ CB Raises 50... Reverses...Equities ok

10 year treasuries, after a lousy auction Tuesday with a 3 basis tail, got hit hard in Asian time as the NZ CB raised twice as much as expected, 50 basis... 10 years hit 2.786 just before 4 am... In London time a bid has developed to bring 10 years near there 5PM Tuesday close, 2.72., currently 2.744. The rest of the curve is steepening today, as more steepener, or reverse of previous flatteners are still in vogue... 2/10 is steeper by 4.5, currently 36, which is wider than the minus 7 on the last employment day... Similarly, 5/30 is 17, better than the minus 15 we had seen recently... We see the trends continuing for a few more days... As we said yesterday, the short covering will continue through the long weekend, then start to reverse in the next week... The Fed may be blinking a bit with a better inflation number yesterday, but as others have told us, take out the used car minus input and you still see real estate and food continue to grind numbers higher... We are still in the inflation has peaked camp.

Today we get PPI, which is expected to be an absurdly higher number of 10.6%, which is already built into the markets... But the bigger question is whether we have a tail on the long bond auction today, like we had on the 10 year yesterday... We see the difference being that the 10 year was at 2.83 yesterday in London time, but rallied to 2.69 at the auction time... The long bond was at 2.85 both yesterday and today in London, and only 2.84 currently... We don't think we see a 3 basis tail, but reality is the Fed is going to start to move away from buying auctions once they start their balance sheet unwind.

Outlook... Street is still very short rates, both in cash and even more so in futures. We see the long term shorts (3 months) with about a 37 basis profit in 10 years, those that got short in the last month, only have a 10 basis profit, use 121 tyu as their approximate entry point... So we see more steepening with the next level of 2/10 closer to 50. Key level for that is right here for 2 years, at 2.37... An exhaustion trade in a bear market rally... For the next level of a rally that has to break today... Plenty of reasons for buying going into a long weekend...Putin was in the WSJ with a headline "
https://www.wsj.com/livecoverage/russia-ukraine-latest-news-2022-04-12/card/putin-says-peace-talks-have-reached-dead-end-vows-war-will-go-on-pstQwRdkQV1WiLl9kwAH

Expect more war over the next few months... This may keep the Fed slower than expected. The terminal rate gauged back 20 or so basis yesterday from 3.2 to 3%... Wirp saw about a half to 1 raise removed... We still think 6 with big balance sheet reduction...


We were asked by BB yesterday about mortgages... We detailed it out clearly... Rates in the last year for mortgage buyers have gone from 2.82 to 5.06 as of Monday night... That means the average loan for a new house, which averages 300,000, has gone from a monthly mortgage payment from 1236 to 1621, a 31% increase... Taken a different way, if you could afford a 300,000 home one year ago, you can only afford 228,000 today... After we talked about Nashville in our commentary yesterday we got pinged from an old college buddy who lives in Wellesley, Mass... He said in the last week 14 homes have come onto the market, the most in one week in a long time... Housing is starting to show strains, it may be two months before the numbers start to show up nationally... But those saying financial conditions are not tightening are clearly wrong....

Not to derail further, but I was one of his attorneys on the healthcare and Medical Board issues. Interesting stories.

Wow. I'll be honest, I don't pay attention to mortgage rates much unless I am buying a house. This chart makes me feel like I won the lottery when I snagged a 2.875% for my new house in September.

My wife thought I was losing my mind and so did her grandma (our realator) because I was trying to find a house in February when our lease is up at the end of June… I kept expressing my concerns around interest rates and how I thought if we waited till April to start looking, we would get screwed.

Ended up buying a house in Afton Village zoned to Memorial at asking price with a 3.875% interest rate back in February. The situations lined up and we're doing a 2 month close and they are leasing back from us for a month which lines up perfectly with when we need to be out without double paying. The second line on that graph. I can only imagine what interest rates would have been had we waited until the end of April to find a house as advised… Would also be interested to see if home prices in Houston have gone down because I haven't heard of any of that at all.

Wow if rates keep rocking maybe when my renters move out I'll pay the house off and do an owner carry

This guy was in front of me at Whataburger this morning.

Ready for some BCTX fireworks today.....dont let me down

Cured cancer and got FDA fastrack approval. Only makes sense it drops.....weird market

I had a 2% morning with AMZN and TSLA calls. Now to try not to lose it chasing chop moves.

I hate the stock market