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Rate Watch To Begin The Fall

By
Mortgage and Lending with Watermark Capital NMLS #311662

On to this week.

 

The big news to hit was that the Bank of England did over a $70bln bond purchase to provide liquidity to overleveraged pension funds. These funds were margin called and would have gone under if the BOE did not intervene. The bank said that they are prepared to do whatever is needed to stabilize the markets.

 

The investment community is looking at this as the first domino to fall. It’s just a matter of time until other funds, institutions, banks, etc. follow suit and will require help to survive. In fact, many are speculating that Credit Suisse and/or Deutsche Bank may be next.

 

Should this happen, there will be panic in the markets. Investors will dash to cash (think March 2020) and the money will wait on the sidelines until they see how the Fed responds. Fed will most likely bail them out, the “pivot” will have begun, and then it’s off to the races. The “recession” story will replace the “inflation” one.  

 

The Bank of England news coupled with a general fear of the state of the global financial system has caused the Fed to host an immediate, closed meeting tomorrow. Click HERE for more details.

 

We have a busy week that ends with the unemployment rate report. We also hear from a lot of Fed members.

 

Monday

 

  • Construction Spending
  • NY Fed President Williams Speaks
  • Manufacturing Data
  • Fed Closed Door Meeting

 

Tuesday

 

  • Cleveland Fed President Mester Speaks
  • Job Openings / Quits
  • Fed Gov Jefferson Speaks
  • SF Fed President Daly Speaks

 

Wednesday

 

  • ADP Employment Data
  • International Trade Balance
  • Atlanta Fed President Bostic Speaks

 

Thursday

 

  • Initial and Continuing Jobless Claims
  • Cleveland Fed President Mester Speaks twice today
  • Fed Gov Cook Speaks

 

Friday

 

  • Unemployment Rate
  • NY Fed President Williams Speaks
  • Minneapolis Fed President Kashkari Speaks
  • Fed Gov Waller Speaks

 

Chart Check (see above)

 

September held on to its reputation of being a horrible month for markets. The panic from last week helped set a new low for the 30yr MBS.

 

 

Without the Fed being dovish, I would expect more pain before things get better. However, with everything that has transpired this past week, it’s just a matter of time until we see more bond purchases, stimulus, and rate cuts.

Posted by

Matt Brady

Branch Manager, NMLS ID#311662

(858)342-8659 cell |

matt.brady@watermarkhomeloans.com  
8885 Rio San Diego Dr │ Suite 201  San Diego, CA 92108     

 

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BIA SMCBoard Member since 2012

 

 

 

 

Peter Tamura
Coldwell Banker Select - Tulsa, OK
BANNOCHIE TEAM

Matt,

 

Yes, very interesting, the US was tightening while other countries, UK, Japan were not. It's so ironic that while everyone was worried about inflation and "Cash is Trash" (Ray Dalio), the USD has been a stellar performer this year, of course it's relative to other currencies. I used to work on the Dollar Deposit Desk at Meitan Tradition in Toyocho, the desk next to ours was the forward desk. There was what is called the yen carry trade. Borrow yen with a very low interest rate, sell yen, buy dollars, then lend dollars at a higher interest rate. Everyone is selling their currency to buy dollars and then governments have to step in to shore up their own currency. I think the Fed cannot sustain the raising of interest rates because it is destroying other countries. The global inter-connectivity means that there are often such unintended consequences.

Oct 03, 2022 10:43 AM
Matt Brady
Watermark Capital - Del Mar, CA
One of San Diego's Best Equity Advisors
Good morning Peter, It has been a great time to travel using our dollar. The FED needs to slow on it's tightening.
Oct 04, 2022 05:41 AM
Peter Tamura

Travel? What's that? That is awesome that you have been able to travel. I helped a Japanese professional tennis player run to the bank on a Saturday and help him cash his check because he doesn't have an account in the US. He loved getting paid in USD!

Oct 04, 2022 08:38 AM