18 European Nations Have Negative 2 Year Sovereign Yields (Germany’s Continue To Decline)

While the USA has seen their Treasury yields generally rising since the election of President Trump, Europe and particularly Germany have not been experiencing the same “love.”

In fact, Germany has the second lowest Bund yields in Europe after Switzerland (who maintain their own currency).


German 2 year Bund yields have been dropping like a stone since 2014.


And have been dropping even more quickly since January 2017 after a brief respite.


At the 10 year tenor, Germany has the lowest government bond yield after Switzerland. And the lowest of any nation with a positive bond yield.


The German Bund yield curve is greater than 200 basis points lower than the US Treasury curve after the 2 year tenor.


This comes as Germany’s deputy finance ministers claims that there will be debt relief for Greece.

The continuing Greek debt crisis and Germany’s insistance on not lowering Greece’s staggering debt load are not helping Greece’s financial institutions like the National Bank of Greece.


Here is an unfortunate photo of German Chancellor Angela Merkel.



Landlords Are Taking Over the U.S. Housing Market (Remnant of Credit Bubble Persists)

Bloomberg — As rising home prices, slow new home construction, and demographic shifts push homeownership rates to 50-year lows, the U.S. is increasingly a country of renters—and landlords.

Last year, 37 percent of homes sold were acquired by buyers who didn’t live in them, according to tax-assessment data compiled in a new report published by Attom Data Solutions and ClearCapital.com Inc.

That number may include second homes, or properties acquired by investors who seek to fix up old homes and resell them at a profit. But it’s also a strong indication that landlords are playing a larger role in the U.S. housing market.

Actually, the US homeownership rate in Q4 2016 to Q4 1985 levels, making it the lowest in just over 30 years (although it was lower in Q2 2015 and Q2 2016). And as foreclosure inventory lessens, the homeownership rate will rise.


Aside from not being the lowest in 50 years, but the share of US home sales for which the owner doesn’t live in the home is growing quite rapidly.


But the homeownership rate is around the 1985-1995 STABLE rate before the Clinton Administration launch the National Homeownership Strategy: Partners in the American Scream.

Take the inland empire of California, Las Vegas and Phoenix. For the most part, investor-owned homes are in greater percentages in those post credit apocalyptic counties. The coast, for the most part, has a lower percentage.


Continued efforts to transform America into higher homeownership rates have ended in disaster.


Duty To Serve [Man] (It’s A Cookbook!): FHFA’s New Duty To Serve Manufactured Housing, Rural Housing and Affordable Housing “Preservation”

The regulator for Fannie Mae and Freddie Mac issued last year a cookbook for the always expanding role of Federal government support for housing. Here is FHFA’s site for Duty to Serve (Man).

Here is FHFA’s Jim Grays discussing the Duty to Serve which requires Fannie Mae and Freddie Mac to support 1) Manufactured housing, 2) Affordable housing preservation, and 3) Rural housing.

Bear in mind that FHFA is ordering Fannie Mae and Freddie Mac to subsidize (at taxpayer’s expense) and drive out competition from the non-taxpayer subsidized competition.

So yes, FHFA’s Duty to Serve is really a Duty to Serve Man. And it is a cookbook … for greater Federal government expansion into the housing finance.

More risk with no capital. Brilliant combination. Yes, a cookbook for financial distress.

Here is a photo of FHFA’s Jim Gray speaking to US Congress on the benefits driving out private market competition and expanding Federal government intervention.



Existing Home Sales Hot-Hot-Hot (Jump 3.3% MoM In January, While Median Price Rises 7.1% YoY)

Existing home sales for January remain hot-hot-hot.

According to the National Association of Realtors, total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, expanded 3.3 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.51 million in December 2016. January’s sales pace is 3.8 percent higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).

On a more negative note, existing home sales are finally back to 2001 levels near the beginning of the horid housing bubble of the 2000s.


Also back to 2001 levels is median price of exisiting homes sales at 7.1% YoY.


Mortgage purchases applications are only back to 1997 levels.


Let us hope we never repeat the house price and mortgage credit bubble that started in 1995.


Here is the original version of Hot-Hot-Hot by Buster Poindexter.



Son Of SAM: The New Shared Downpayment Mortgage From Unison (You May Leave Your Savings In San Francisco)

The legendary shared appreciation mortgage (SAM) has been around for decades. It was an attempt to trade off the mortgage rate for a share of appreciation in the home. Instead of an 18% mortgage rate, the borrower only pays, say, 10% on their mortgage, but promises to give up 50% of the gain on the home upon sale (or a predetermined date). The SAM concept was also used in the UK where elderly households received cash in exchange for a percentage of their home price. It wasn’t very popular after UK home prices skyrocketed.

As you can see, a London England property purchased in 1997 would a 50% share would generate quite the payoff for the lender.


Since FHA insurance is available for 3%, the Shared Downpayment Mortgage will be used in JUMBO markets like San Francisco where borrowers may have problems accumulating 20% down for a million dollar home. The is where Unison comes in. 


Unison will split the downpayment and take 35% of the housing gain.

Of course, there are always asterisks!!!!

1. The examples presented in the table above are intended only to demonstrate the basic operation of the Unison HomeBuyer Agreement. Many other transaction structures and outcomes are possible. Unison is not a lender and Unison HomeBuyer is not a loan program. Any loan terms reflected herein are for illustrative purposes only. Loan rates and terms available from participating lenders may differ.

2. At closing you will pay all transaction costs, including third party fees (such as credit and appraisal reports, and title and escrow fees), any lender origination fees, and Unison processing and transaction fees. This will increase the amount of cash you need to contribute to the purchase transaction at closing.

3. When you sell your home you will be responsible for repaying any outstanding balance on your mortgage in full from your portion of the sales proceeds. The Unison HomeBuyer Agreement has no impact on this – you would have to pay these expenses whether you have a Unison HomeBuyer Agreement or not. The example assumes a 30-year loan, 4% interest rate, and ten year holding period. Ten years of monthly loan payments brings the loan balance down by approximately $170,000 from $800,000 to $630,000.

4. When you sell your home you will also be responsible for paying all selling costs, including brokerage commissions, which can typically amount to 6-9% of the sale price, from your portion of the sales proceeds. Selling costs are not shown in the example. The Unison HomeBuyer Agreement has no impact on this – you would have to do this whether you have a Unison HomeBuyer Agreement or not. If the sales proceeds are not sufficient to pay the mortgage balance, whatever amount is due to Unison, and the selling costs, you will be required to make up any shortfall. For example, assuming selling costs of 7.5% and a sale price of $1,200,000, your selling costs would be $90,000. If your Unison HomeBuyer Agreement is settled other than by sale of your home, such costs will not apply.

So, it is not a true risk sharing agreement.

To paraphrase Tony Bennett, you may leave your savings in San Francisco if home prices continue to rise. But you did get someone to chip in 50% of your down payment. So do your homework!


50 Shades Of Regulation: U.S. Firms Slash Interest Tab in $100 Billion Refinancing Blitz (But Not Households?)

The Wall Street Journal had an interesting story entitled “U.S. Firms Slash Interest Tab in $100 Billion Refinancing Blitz.”

Rising interest-rate expectations are fueling the biggest corporate-refinancing boom in years.

U.S. companies refinanced $100 billion of loans in January, the largest monthly total in at least a decade, according to data from S&P Global Inc. More than 110 low-rated companies, including software giant Dell Technologies Inc. and car-repair chain Service King Collision Repair Centers Inc., have refinanced loans since October, according to data from LevFin Insights LLC.


Well, while corporations are refinancing their debt expecting a rise in interest rates, American households are not.


Even the WSJ had a dour forecast for residential mortgage refinancing from 2016.


So, why are corporate bond refinancings so fluid while residential mortgage refinancings are so tepid?

One reason is that borrowers and lenders remained handcuffed (not the Fifty Shade of Grey-type handcuffs) by the regulations that occurred to allegedly prevent another financial crisis. Like tighter lending standards, additional red tape and super-sized home prices.


Its been over 10 years since the housing bubble began to burst (10 years after), and now fewer households can take advantage of super low mortgage rates thanks, in part, to handcuffs wielded by the Consumer Financial Protection Bureau and Dodd-Frank. And not the 50 Shades of Grey kind, either.







Initial Jobless Claims Near Lowest Since 1973, But Hours Worked YoY Shrinks By Most Since Great Recession

This is like one of those “good news, bad news” jokes.

First, the good news.

Initial jobless claims fell to 234K as of the week of February 4th, beating expectations of 249K.


This is near the lowest level since 1973.


Now for the bad news.

As of Q4 2016, average weekly hours YoY fell by the most since 2008 during The Great Recession.


So, a near record initial jobless claims report, but lower HOURS worked.

Its as if the US economy has morphed into an Andy Dwyer economy — all low paying part-time jobs.

Andy and the possum

Andy and the possum