Consumer Sentiment Crashes to New Lows as Stocks Hit Record Highs – Dollar and Treasuries Hold Steady

Consumer Economy

• Housing Starts (HOUST) 1.47M -42k -2.79% m/m
• Consumer Sentiment (UMCSENT) 44.8 -5.0 m/m

Housing starts ticked lower, but they remain near recent highs.  This is not projecting a 2008-severity housing recession – compare with the plunge in housing starts that happened back in 2006.

Consumer Sentiment hit another new all-time low (n.b. FRED updates this series monthly, and 2 weeks late).  This week’s update (every 2 weeks provided by econoday) was really bad news. I updated the series by hand.

Credit & Rates

• Total Bank Credit (TOTBKCR) 19.53T +34.7B (+0.18% w/w)
• Fed Balance Sheet (WALCL) 6.71T -14.9B (-0.22% w/w)
• US 30 Year Mortgage Rate (MORTGAGE30US) 6.51% +15 bp
• 3-Month Treasury (DGS3MO) 3.68% -1 bp
• 1-Year Treasury (DGS1) 3.85% +3 bp
• 10-Year Treasury (DGS10) 4.56% -3 bp
• 20+ Treasury ETF (TLT) +1.22% w/w
• US Confidence (AAA10Y) 1.07% +0.01% w/w

Bank credit expanded this week (about 9% annualized), but it was only 50B over the past 4 weeks, or about 12B per week (3% annualized).  Bank credit is not expanding nearly enough right now, overall.  It seems to be heading lower, and that’s recessionary.

The Fed reverse-money-printed this week (-15B), but both up weeks and down weeks right now are pretty minor.  My sense is that our Bibi-flation experience is being driven by energy shortages, not by money printing, and not by bank credit expansion.

Rates mostly fell this week, with the largest plunge seen in the 20-year.  TLT had a decent move [+1.22%] as a result.  Bond yields rose Monday-Tuesday, and then reversed course Wednesday-Friday.  Maybe it’s just “dip-buying” after a big decline?  I am not sure.  Money continues to flow into the short end of the curve (those 1-month treasuries), too.

CME Fedwatch Tool projects a 4% chance of one rate INCREASE on the June 17th meeting.

Currencies

The buck was mostly unchanged, losing 0.02 [-0.02%] to 99.19. The buck dipped on Wednesday, but bounced back by the end of the week. The slight decline was enough to pull DX into a daily downtrend.

Winners

• GBP 1.34 [+0.0095 +0.71%]
• CHF 0.78 [-0.0021 -0.27%]
• INR 95.69 [-0.2800 -0.29%]
• RMB 6.80 [-0.0122 -0.18%]

Losers

• EUR 1.16 [-0.0023 -0.20%]
• JPY 159.19 [+0.50 +0.32%]
• AUD 0.71 [-0.0027 -0.38%]
• CAD 1.38 [+0.0070 +0.51%]

JPY was one of the “losers” this week.  This, even though there were a number of