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.



Bubble? New Home Sales Disappoint (555k vs 571k Expected) — Back To 1990 Levels

New home sales for January 2017 were released and they were not up to expectations. 571k was the expectation, but only 555k were delivered. But there was a 3.74% MoM gain since December 2016.


New home sales continue to disappoint after the massive mortgage credit bubble of the last decade and are only at 1990 levels.


But the median price for new home sales continues to escalate and is well above the peak of the housing bubble.


Are we in a house price bubble?


Let me answer that this way. “Does your dog bite?” I am sure that Fed Chair Janet Yellen would answer “That is not my dog.”















Cones Of Dunshire: Yellen Speaks As M2 Money Velocity Lowest In History Despite Doubling Of Federal Debt And Fed Expansion

Fed Chair Janet Yellen spoke to Congress this morning at her semi-annual monetary policy testimony. Trying to juggle inflation and unemployment (Humphrey-Hawkins) is difficult … like the Parks and Recreation’s game Cones of Dunshire.  Yellen testified  “waiting too long to hike (rates) is unwise.”

Well, the 10 year Treasury yield jumped on her statement.


Oddly, Yellen forget to mention that the US Public debt has doubled since 2008 while M2 Money Velocity has crashed to an all-time low.


Although little has been discussed about the unwinding of the Fed’s balance sheet other than “the Committee has continued its policy of reinvesting proceeds from maturing Treasury securities and principal payments from agency debt and mortgage-backed securities. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, has helped maintain accommodative financial conditions.”


Or what to do about the exploding pension liabilities and how The Fed’s zero interest rate policies have helped increase the vulnerability of state pension funds.


Or that average hourly earnings have gotten progressively worse with the additional Federal debt and all The Fed’s easing.


Here is The Fed’s Assistant Chair Stanley Fischer explaining the rules of the economy to Fed Chair Janet Yellen.









Cyclone! The Fed/Obama Labor Recovery In 5 Charts (And They Are Ugly!)

Both outgoing President Obama and lingering Federal Reserve Chair Janet Yellen are making claims about the number of jobs added under their leadership.

Yellen: “Job market strong, signs of wage growth.” And the “strongest job market in nearly a decade.”

Obama (during his farewell press conference last Friday): “Since I signed Obamacare into law, our businesses have added more than 15 million new jobs,”

Sounds impressive, unless you look closely at the numbers.

First, about the 15 million new jobs added since Obama signed Obamacare into law. The black box in the chart below shows the real average hourly wages since 2010 (through 2014). They were declining.


And, of course, my least favorite labor market chart: Average hourly earnings of production and nonsupervisory employees YoY (about 82% of the US population). The WORST wage recovery from a recession since President Lyndon B. Johnson.


Meanwhile, productivity growth has fallen to its lowest level since the Jimmy Carter malaise era.


In fairness to Obama and the Federal government, they did expand Medicaid, Welfare and food stamps (Snap) by 46% since Obama became President. Unemployment insurance and Social Security increased by 26% since December 2008. Partially to compensate for their poor track record for high paying job creation.


Wage growth is the worst since 1965 for most Americans. How is this the strongest job market in nearly a decade? Particularly when U-6 underemployment is still higher post recession that the previous two recessions?


So, it is literally a cyclone of bad news for the majority of American workers. None of whom will be attending the World Economic Forum in Davos Switzerland in January.


At least World Economic Forum attendees will be able to grab some swag in Davos!






Dollar Climbs to Strongest Since 2003 As Real Earnings Growth Continues To Decline To Lowest Since Jan ’15

The US Dollar continues to strengthen while real earnings growth continues to decline.

(Bloomberg) The dollar climbed to the highest level since 2003 against the euro as the prospect of a steeper path for U.S. interest rates next year filtered through markets. European bank stocks climbed while bonds and gold slumped.

The greenback extended its advance against major and emerging-market peers after the Federal Reserve’s first and only interest-rate hike of 2016 was accompanied with a signal of three increases next year. European banks rallied to near an 11-month high on bets that higher rates will make lending more profitable, while a measure of stock volatility in the region fell to a two-year low. U.S. 10-year yields reached the highest level in more than two years, while 30-year bunds led a decline in German securities. China’s 10-year benchmark headed for its biggest one-day increase and gold fell to a 10-month low.


The Fed’s move has added to speculation of a shift away from global central-bank policy and toward fiscal stimulus that has helped fuel a rally in stocks and rout in global bonds since the election of Donald Trump in November. Still, the U.S. central bank stands largely alone in actively tightening policy, boosting the dollar against its peers. The Bank of England kept its key rate at a record low Thursday, mirroring moves by policy makers in Norway, South Korea and Switzerland. The European Central Bank last week extended quantitative easing through 2017, depressing the euro.


Real earnings growth? Falling like a paralyzed eagle.


I wonder if the “animal spirits” will be trapped by The Fed’s continued rate increases?


Remember, The Fed and Janet Yellen are likely to do their dance and continue raising rates during 2017.





US Treasury 10Y Term Premium Turns Positive For First Time Since Sept ’15

At last, the US Treasury 10 year TERM PREMIUM has turned positive!

(Bloomberg) The term premium for 10-year Treasuries, which shows the extra compensation investors demand to hold the notes instead of a series of shorter-maturity obligations, climbed to 0.24 percent as of Dec. 12, the highest since September 2015. The measure has increased along with all other U.S. yields since Donald Trump’s election as president. After being positive for most of the past five decades, it had turned negative this year as traders wagered that the world would be stuck with slow economic growth and stubbornly low inflation.


According to The Adrian Crump & Moench 10 Year Treasury Term Premium, it skyrocketed and turned positive when Trump was elected President on November 8th.


Does it mean the the “low interest” party bus is ending?


Now waiting for The Fed’s annoucement at 2pm EST, the least surprising financial news release of the century.



Mortgage Purchase Applications Decline By 7.40% NSA (Least Wonderful Time Of The Year)

Ah, mortgage applications in December remind me of the old Andy Williams song, “It’s The Most Wonderful Time Of The Year.” But not for mortgage lenders, brokers and correspondents.

The seasonally unadjusted mortgage purchase applications index from the Mortgage Bankers Association fell 7.40% from the preceding week.


Yes, it’s that least wonderful time of the year for the mortgage industry.


The MBA mortgage refinancing index is down 3.6% from the preceding week. Mortgage rate spikes in 2016 and 2013 are boxed in pink.


The least wonderful time of the year for the mortgage industry is upon them once again.