Two economic reports and Fed Activity:
- Durable Goods: New Orders -1.0% m/m [prior -5.0% m/m]; topping process (month #2)
- Median New Home Sales: Price +2.7% m/m [prior -9.2% m/m]; slight rebound in a sharp downturn (month #5)
- Fed Rate Increase: +25 bp
- Fed Balance Sheet: +94b [+1.1% m/m, prior +3.6% m/m], to 8.73 Trillion.
In poking around my old Fed database index, I ran across some weekly banking numbers. I found one time-series on large-bank gains/losses that showed a huge drop during 2008, presumably from those bad MBS that drove the banking crisis back then. Maybe this series could tell us what the banks look like today? Sorry little people, the Fed “discontinued” this series (among many others) back in April 2022. The data, one year ago, showed that the bank losses at that moment were almost as bad as it was in late 2008. How much worse is it today after all these rate increases? Back last April, the 10-year was at 2.37%, and losses were -62 billion. When the current crisis started rates were at 3.8%. So maybe losses are -120 billion? Which is perhaps 50% worse than 2008. Losses have dropped since then, so that’s a plus – all the fear has driven the 10-year yield back below 4%.
Powell sure knows what the losses are, but he and his buddies made the decision to keep it a secret. Perhaps that’s why he “wiped his nose” post-statement in Chris’s recent video (here). An updated version of this horrific chart is probably fresh in his mind. But No Chart For You, little people. We wouldn’t want you to become Banking Hesitant. I call it the Fed Bank Loss Coverup.
Below find the weekly moves in short & medium term rates for this week. It is a noisy chart, but see how Fed Funds rose +25 bp to 4.83%, along with the 3 & 6-month yields moving higher (+9-21 bp), while the 1-month and the 10-year yields inched lower (-1-5 bp). Looks like 1-month bonds are still seeing inflows from money fleeing the banking system, and the 10-year is about banks taking that Fed-BTFP cash (for their 0.75% 10-year bonds) and “reinvesting” that money into brand-new 10-year bonds yielding 3.38%.
by sagerxx