Credit & Rates
Fed Balance Sheet (WALCL); 7.07T, -33.1B (-0.47% w/w), -8.63% y/y.
Total Bank Credit (TOTBKCR); 17.87T +34.7B (+0.19% w/w), +2.90% y/y.
30 Year Mortgage Rate (MORTGAGE30US); 6.12% +4 bp
10 Year Treasury (DGS10); 3.97% +22 bp
QT continues, and bank credit expanded by a lot this week (annualized: +9.88%). That’s inflationary, but only if it lasts for a longer period of time.
Rates of longer-dated treasury bonds shot higher this week; it was a (massive) 16-30 basis point move. Seen through the lens of TLT, the long-dated bondholders saw a -3.06 % loss to capital this week, with 40% of the losses on Payrolls Friday. That’s more than 8 months of interest payments – wiped out in one week. But don’t worry, bonds are “safe”. (And effective?)
CME Fedwatch Tool projects a 97% chance of just one cut on the November 7th meeting. Rising rates = market predicting fewer rate cuts in the future.
Consumer Economy
ISM Manufacturing Index; 47.2; that signals contraction
Nonfarm Payrolls (PAYEMS); +254k (+0.16% m/m); much larger than expected.
While manufacturing continues to decline, the headline payrolls number was “shockingly” higher, one month before the “Election.” Note: the headline PAYEMS series is an “establishment survey” result.
Zerohedge reported that there were a massive number of new government workers this month seen in the “household survey.” (source – ZeroHedge). Breaking it down further:
+ Government (CEU9000000001): +918k
+ Federal: (CES9091000001): +2k
+ State: (CEU9092000001): +356k
+ Local: (CEU9093000001): +561k
Long story short: local & state governments accounted for a massive increase in “household survey” workers this month. Hopefully, they aren’t all in public “health.”
So what’s the difference between “household” and “establishment” surveys? The “household” survey means the BLS calls individual homes and asks them questions. The “establishment” survey means the BLS calls businesses and governments and asks them questions. I’d guess a “household” phone call might not get reliable data from migrant households, although the “establishment” survey might, since it talks to businesses and governments.