by Mish Shedlock, Mish Talk:
If you are a bond market bull, it’s been a tough month. Let’s review what happened, why, and what’s ahead.
Yield Change In Past Month
- 2-year: +49 Basis Points
- 5-Year: +55 Basis Points
- 10-Year: +46 Basis Points
- 30-Year: +38 Basis Points
And to add more injury, 30-year mortgage yields rose from 6.87 percent to 7.37 percent as of yesterday, down to 7.30 percent today according to Mortgage News Daily.
That’s a rise of 43 basis point from a month ago to today.
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US Treasury Yields Monthly Average
This is the worst bond market selloff ever in percentage terms.
For over two years I have heard nonsense about rent, Owners’ Equivalent Rent (OER), etc. and how it’s “lagging”.
OK but lagging to where?
Ominous Technical Trends
On April 3, I noted Ominous Technical Trends for US Treasury Bulls, Three Durations
Technical patterns on 2-year, 10-year, and 30-year US treasuries all suggest yields are heading higher.
The yield on the 2-year note was 4.7 percent at the time. Yesterday it hit 4.97 percent. The technical pattern broke in the expected direction.
The CPI Rose Sharply in March
The CPI rose 0.4 percent in March. Rent is up another 0.4 percent in March with gasoline up 1.7 percent. Together, the pair was about half of the total rise.
For discussion of the above chart, please see The CPI Rose Sharply in March Led by Shelter and Gasoline
Yet Another Groundhog Day for Rent
I repeat my core key theme for over two years now. People keep telling me rents are falling, I keep saying they aren’t.
Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.4 percent in March. Rent of primary residence has gone up at least 0.4 percent for 31 consecutive months!
The “rents are falling” (or soon will) projections have been based on the price of new leases and cherry picked markets. But existing leases, much more important, keep rising.
Only 8 to 9 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.
The overall CPI and core CPI Joined the party this month, all rising 0.4 percent.
Not Transitory
For at least a year, with nearly all the analysts telling me that rent is lagging and we were headed for a soft landing, my view has been the decline in the rate of inflation is what’s been transitory.
CPI Year-Over-Year
We have heard nonsense about a soft landing for a year.
In June, the year-over-year CPI fell to 3.0 percent. Since then it’s been trending higher.
Allegedly that’s OK because “rent is lagging”, a message we have heard for 2 straight years!
I keep asking, lagging to where?
