Consumer Economy
Existing Home Sales (EXHOSLUSM495S); 4.0M -20.0K (-0.50% m/m)
Median New Home Sales Price (MSPNHSUS); 407.2K +3.50K (+0.86% m/m)
Existing Home Sales are still moving mostly sideways at the lows.
New home sales prices are moving slowly down off the highs set back in late 2022.
High 30-year mortgage rates (6.86%) are probably bad for the housing market.
Credit & Rates
Total Bank Credit (TOTBKCR); 18.370T +6.4B (+0.03% w/w, +1.8% annualized)
Fed Balance Sheet (WALCL); 6.689T -24.5B (-0.37% w/w)
30 Year Mortgage Rate (MORTGAGE30US); 6.86% +5 bp
10 Year Treasury (DGS10); 4.52% +9 bp
20+ Year Treasury ETF (TLT); 84.55 -1.75 (-2.03%)
Bank credit had a second bad week; a 1.8% annualized increase is deflationary.
The Fed actually did QT of 25B this week – after expanding slightly (about +4B) over the previous 2 weeks.
In spite of the deflationary hints, money fled the long end of the Treasury market curve this week – the biggest rate increase was in the 30-year [+15 bp], which is now at 5.04%. This was a big (bearish) move for the long-dated treasurys.
That said, over the last six months, “risk-on/off” (rallies or declines in SPX) have had a reasonably large influence on the long-dated bond rates. Example: the recent 6-week rally in SPX appears loosely connected with the 50 bp move higher in the 20-year yield, although the association remains a little rough. The earlier (March-April) 23% decline was also (roughly) associated with a 60 bp decline in that same instrument, although the yield started dropping a month or so prior.
At the same time, short rates did move slightly lower this week; it appears that over the past few weeks, Big Money doesn’t like the risk associated with the longer-duration debt. “Big Beautiful (Bloated) Bills” apparently results in a flight out of long-dated Treasurys, but the short-term rates were unaffected.
Just looking at the “yield curve”, Big Money likes the 1 to 5 year durations best. I say this because this group has the lowest yields: 3m = 4.34%, 5Y = 4.08%, 30Y = 5.04%.
by davefairtex 
