Aka stagflation & not just Sweden, but most european economies looking fragile, with high private debt to GDP ( 140% in sweden), with most mortgages in floating rates (82% in Sweden), retail sales fairing terribly ( 5% down YoY), I’d be surprised if their CB keeps on hiking IR pic.twitter.com/3RggXv9KkH
— Cagatay Koc (@Cagatykc) November 22, 2022
When is the implosion of Housing Bubble 2.0 going to crash the Fed’s Ponzi markets?
HOUSING COLLAPSE: Pending Home Sales Post Largest Drop Ever in October (-40%) as Deal Cancellations, Price Cuts Hit Record High – Redfin
— Don Johnson (@DonMiami3) November 21, 2022
The Federal Reserve could be forced to slow the reversal of its asset purchase programme as deteriorating bond market liquidity could become worse than during the COVID-19 pandemic, MSCI has warned.
Liquidity in the bond market has worsened since the Fed announced its intention to slow its bond purchases last autumn and became worse still when it announced it would be reducing its bond portfolio from January this year.
“During the early days of the COVID-19 crisis, Fed chair Jerome Powell partly justified the Fed’s asset purchase program as necessary to restore market liquidity,” Greg Recine, vice president of MSCI Research, said.
“Today, it seems quite plausible that treasury market liquidity may soon be worse than what was experienced during COVID-19.”
The Fed announced a massive asset purchasing programme at the onset of the coronavirus crisis in March 2020 in a bid to restore the smooth functioning of the markets, including $8.56bn of fixed income ETFs, resulting in a massive improvement in liquidity conditions.
With markets returned to normality, the Fed announced plans to sell off its entire ETF holdings in June 2021.
From September this year, the Fed will look to accelerate its wider bond portfolio reduction, doubling the amount it sells to $60bn a month.
Investor Purchases of Single-Family Houses Plunged 32% in Q3, Plummeting
FED- Household savings are elevated! Household savings:
The default rate for US companies will soar to 3.75% if the Federal Reserve’s fight against inflation only tips the economy into a shallow recession, according to S&P Global Ratings. A more serious downturn would send the rate to 6%.
Higher interest rates and consumer prices are expected to push 69 speculative-grade companies to fall behind on debt servicing by September 2023 in S&P’s baseline scenario, more than doubling the default rate from 1.6% a year earlier. That would be the highest since June 2021, surpassing the 10-year average of 3.1%, analysts led by Nick Kraemer wrote in a note on Monday.
The 10y treasury yield is now lower than the overnight rate (SOFR). Last time this happened the whole world went to shit a few weeks later.