thehousingbubble@gmail.com
Blog

Plunging Sales, A String Of Defaults, Broken Promises To Investors And Revelations Of Previously Hidden Debt

It’s Friday desk clearing time for this blogger. “A sudden rise in mortgage rates pushed the average 30-year rate to 4.42% this week. It’s a stunning jump that harks back to the sharp loss in borrowing power during the infamous rate spike of 1980. Now before you say, ‘quarter-point, that’s not so bad,’ consider what that means to a potential borrower who can pay $2,500 a month for a mortgage. This week, the bank would lend $498,000 for that payment at these rates — that’s down $15,600 or 3% in just seven days. On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … SIX BUBBLES!“

“Average mortgage rates are higher for all loan types today with the 30-year mortgage rate crossing above 5%. The latest rate on a 30-year fixed-rate mortgage is 5.17%. That’s a one-day increase of 0.219 percentage points. Money’s daily mortgage rates reflect what a borrower with a 20% down payment and a 700 credit score — roughly the national average score — might pay if he or she applied for a home loan right now.”

“Already, a family buying a median-priced home will be spending over $300 more per month on their monthly mortgage payments than they would have if they had purchased a home a year ago, according to Realtor.com, reflecting both the run-up in mortgage rates and home prices. ‘For buyers and sellers, this spring will offer a period of transition, in which high prices will combine with rising interest rates to challenge budgets already contending with high inflation,’ George Ratiu, manager of economic research at Realtor.com said, adding that there are already ‘early signs of market adjustment, with sales of both new and existing homes down.'”

“Instead of creeping upward early this year, rates jumped like a startled cat. ‘While house prices may move up easily, by ‘downside sticky’ we mean that prices won’t easily move down,’ said Odeta Kushi, deputy chief economist for First American Financial Corp, explaining that ‘home sellers would rather withdraw from the market than sell at lower prices.'”

“Opendoor Technologies stock deserves to fall. With interest rates rising, its prospects look even bleaker moving forward. Even the most fundamental analysis would soon uncover the greater truth. As it turns out, all Opendoor did was dig itself deep into a hole despite rapidly improving top-line results. 2021 net losses increased by 161%, reaching $662 million overall. That speaks very poorly to the iBuyer business model and seems to justify Zillow’s move out of the business.”

“Toronto realtor Nasma Ali has noted a marked slowdown in housing demand in the red-hot Greater Toronto Area over the past few weeks, which she sees as a likely precursor to a reckoning in the suburbs and surrounding towns that have seen blistering price growth over the past two years. ‘I had listings that, in January, would have had a 100+ showings,’ Ali said. ‘All of a sudden, we’re only getting five to six in four days. This is a transition period and it’s not for all markets or price points. But we’re seeing it.'”

“‘This is the most dramatic increase in five-year fixed rates that I can remember, and I’ve been in this business for two decades,’ said David Larock, a mortgage agent at Integrated Mortgage Planners. ‘I’m starting to see purchase and sale agreements come in with financing conditions, which has been unheard of in the last couple of years,’ he said. ‘It’s still a seller’s market,’ said Toronto realtor Lisa Bednarski. ‘But what we’re going to stop seeing are the homes that sell for inexplicable amounts above their market values.'”

“Market headwinds, such as the tougher lending environment and affordability constraints, were biting and had led to ‘animal spirits evolving from FOMO (fear of missing out) to INPT (I’m not paying that),’said ANZ’s chief economist, Sharon Zollner. ‘We now expect house prices to fall 10 per cent in the year to December 2022. That’s a similar-sized contraction as the one following the global financial crisis. But given the very strong starting point, we’d still call this a soft landing.'”

“Don’t believe suggestions that China’s housing and property crisis is easing – if anything this week has shown it to be a black hole that is only getting wider and deeper. There is simply no good news – not from official statistics, prices, demand, lending, share prices and credit. In the past week, six Chinese developers, including the major international borrowers, China Evergrande Group and Kaisa Group Holdings have revealed that they can’t publish audited annual results by Hong Kong’s March 31 deadline.”

“All excuses (including the shock news at a subsidiary of China Evergrande that unnamed ‘banks’ had taken $US2.8 billion from its property services subsidiary without telling anyone) designed to delay the inevitable bad news that these companies have incurred losses that will total billions of dollars. The latest situation follows plunging sales, a string of defaults, broken promises to investors and revelations of previously hidden debt at numerous real-estate companies.”

“One unnamed western analyst reckons there are a string of ‘going-concern warnings’ from auditors just waiting in the wings for Chinese property companies – not all, but quite a few and enough to rattle confidence and the entire Chinese financial system. Jizhou Dong head of China property research at Japanese investment banking giant, Nomura summed up the situation best of all: ‘Developers who changed auditors have lost their credibility to the capital markets’… and “Even if they manage to announce annual results after the auditor change, the markets will still question the trustworthiness of their financials.'”

Related Posts

It’s Grapes Of Wrath Stuff

A holiday topic starting with the Herald Tribune in Florida. "After back-to-back double-digit yearly growth…

This Post Has 113 Comments

    1. I dunno i keep finding great deals this week 85% hamburger $2.99 lb big packages 3-4 lbs limit 2 ($1 off per pound)…..We cut it up into 1 lb chunks and freeze them…….Last week if you spent $25 on frozen fish you got $7 off in points so cod flounder haddock is in our freezer.. gotta use your dgital coupons and stock the freezer took out a angus beef steak yesterday for the crockpot tonight. I did notice my Nescafe instant is down to 6.5 ounces but it has such a nice beautiful new label

      1. My favorite salad dressing looked weird when I went to buy it yesterday. Down to 12oz from 14oz but don’t worry it says “now even tastier.”

        I got a vacumn sealer for my birthday to freeze deals better when they come along.

      1. are creating the conditions for more unrest and chaos worldwide

        Sounds like their plan is on schedule.

    3. Raw meat: holdinging relatively low. (breast ~$2.50/lb, gr bf $4)
      Rice and beans: still cheap
      Sugar flour eggs and milk: going up but not skyrocketing.
      Condiments like oil vinegar: up
      Fresh and frozen produce are up more.
      Multinational-branded convenience foods like snack-bags, breads, bottled drinks: skyrocketing.

    5. When I food shop the masked purple haired troglodytes stare as I say to myself with each item I pick up – “Fooking Biden”.

  2. ‘home sellers would rather withdraw from the market than sell at lower prices’

    Odeta, meet the stupids:

    ‘all Opendoor did was dig itself deep into a hole despite rapidly improving top-line results. 2021 net losses increased by 161%, reaching $662 million overall’

    1. As this rate we may get to a sustained double digit level fairly quickly.

      Hope everyone is ready….. I am.

    2. Excellent chart. It suggests that we are in full reversal of the Fed’s QE-induced covid bubblet.

        1. It seems like it is already getting closer to 5% today. I actually was not expecting that …

          So how does the reversal of QE in Q3 impact this? Will they just let terms expire – or will they start selling the securities

          It also seems that NAR is starting the back tracking


          The average rate on the 30-year fixed mortgage shot significantly higher Friday, rising 24 basis points to 4.95%, according to Mortgage News Daily. It is now 164 basis points higher than it was one year ago.

          “That’s the second time this week, and it puts this week on par with the worst week from the 2013 taper tantrum — a record we didn’t see being legitimately challenged a few days ago,” said Matthew Graham, COO of Mortgage News Daily.

          On Tuesday, the rate had hit 4.72%, a 26-basis-point jump from March 18. The quicker-than-expected rise in rates has weighed on demand for mortgages and refinancing loans.

          The rate surged as the yield on the U.S. 10-year Treasury also took off. Mortgage rates follow that yield loosely, but not entirely. Mortgage rates are also influenced by demand for mortgage-backed bonds. The Federal Reserve is scaling back its holdings of these assets and is also hiking interest rates.

          It couldn’t come at a worse time, as the all-important spring housing market gets underway. Potential buyers are already facing extraordinarily tight supply and sky-high prices. With both rates and prices considerably higher, the median mortgage payment is now more than 20% higher than it was a year ago.
          …
          Economists are already beginning to revise their sales figures lower for the year. Lawrence Yun, chief economist for the National Association of Realtors, said Tuesday that he expects the rate to hover around 4.5% this year, after previously predicting it would stay at 4%.

          NAR’s latest official prediction is for sales to drop 3% in 2022, but Yun now says he expects they will fall 6% to 8%. NAR has not officially updated its forecast.

          https://www.cnbc.com/2022/03/25/mortgage-rate-soars-closer-to-5percent-in-its-second-huge-jump-this-week.html

          1. also from the article. If only there was some mechanism in the market – maybe supply/demand 🙁

            But Blackstone apparently has free money

            Potential buyers are already facing extraordinarily tight supply and sky-high prices. With both rates and prices considerably higher, the median mortgage payment is now more than 20% higher than it was a year ago.

      2. Ok – the fed is starting to get worried and are doing some telegraphing …

        Today
        “If it’s appropriate to raise interest rates by 50 basis points at a meeting, then I would think that we should do that. If it’s appropriate to do 25, then we should do that,” Williams said Friday during a virtual central banking panel . “I don’t see any reason not to do one or the other, it’s just we need to make the right decisions based on what we’re seeing in the economy.”

        Feb 18
        With high inflation hitting the US economy, it is time for the central bank to raise the benchmark borrowing rate, but there is no reason for a “big” early move, a top Federal Reserve official said Friday.

        Instead, policymakers can “move steadily” to get the key lending rate off zero and back to more normal levels over the next year or more, New York Federal Reserve Bank President John Williams told reporters.

        1. Ok – the fed is starting to get worried and are doing some telegraphing …

          BS. They are not worried at all. This is 100% intentional. They could raise rates in a minute if they wanted. They are intentionally late to do anything. Notice how the Fed Funds Rate is the most divorced from CPI that it has ever been in history, yet no concern by the FED to quickly try to raise rates.

  6. ‘The latest rate on a 30-year fixed-rate mortgage is 5.17%. That’s a one-day increase of 0.219 percentage points. Money’s daily mortgage rates reflect what a borrower with a 20% down payment and a 700 credit score’

    Larry says we might see 5% by next year. And how many people are putting 20% down?

    1. Downpayment or eat. Downpayment or drive to work? Decisions decisions in Brandonville.

      1. Now they’re going to send out stimulus cards for fuel. These clowns are doing everything they can to fuel hyperinflation.

  9. Libtards reaping what they voted: NYC edition.

    Workers say crime-ridden NYC not worth the hassle anymore

    https://nypost.com/2022/03/24/workers-say-crime-ridden-nyc-not-worth-the-hassle-anymore/

    Conditions in New York City have deteriorated so badly that a large segment of its private-sector workforce is thinking of fleeing rather than returning to the office, a new business survey released Thursday reveals.

    Forty percent of employees who reside in Manhattan said they’re thinking of leaving as did 48% — nearly half — of workers who live in the city’s other four boroughs, the online Morning Consult poll of 9,386 employees found. It was commissioned by the Partnership for The City of New York.

    Public safety concerns are an obstacle to persuading more employees working remotely to return to their Manhattan offices.

    3. I noticed the same words, same talking points, for a long time. It was driving me crazy.

      Can a Society be sane or rational if they are brainwashed and defrauded 24/7 ? They got billions to take a expiermental vaccine , that isn’t a vaccine. The vaccine doesn’t work , but get your booster over and over, after you get your fake test.

      What’s scary, is if your surrounded by people that believe the nonsense they pump out , it becomes one more division of divide and conquer .

      Now, I understand that its shocking and unbelievable that forces would conspire to harm the public , loot the public, destroy freedoms , destroy business, sovereign states, and Constitutions, but no other conclusion can be drawn.

      So now that Biden is openingly talking about the US leading a “New World Order”, without explaining what that means, the take over is being announced.
      Will one reporter ask Biden what he means by a ” New World Order?”
      I predict a new advertising / news campaign on New World Order, necessary for Government to protect you. This will be just as fraudulent as Covid Pandemic, fake vaccine, war coverage, climate change etc.
      Just today Biden talking about Russia releasing a bio weapon. Is this going to be the next false flag Pandemic , that Bill Gates has already predicted?

      Fake Corporate owned news is being used as a weapon of take over and invasion and hijacking the US . And if you don’t buy into the fraud, they make you the enemy.
      Its almost predictable that they have to do something before the midterms to proceed with the overriding agenda of Great Reset and New World Order Dictorship planned.

    4. The guy who made this video “A Call for an Uprising” recently posted a new YT video after a long absence, announcing two new channels. I have to see if he’s on bitchute, rumble, etc.

      He discusses predictive programming. Reminded me that when “The Walking Dead” debuted in 2010, I was watching the first episode and enjoying the hell out of it until I thought “oh, sh!t.”

  14. Another “oh dear” moment in time….

    Kiwi Home Owners Face Soaring Mortgage Repayments as Rates Jump

    https://www.bloomberg.com/news/articles/2022-03-25/kiwi-home-owners-face-soaring-mortgage-repayments-as-rates-jump?srnd=premium-asia&sref=ibr3A0ff

    New Zealand mortgage rates are set to rise above 5% for the first time in seven years, damping economic growth and exerting further downward pressure on a cooling housing market.

    The interest rate on a two-year fixed mortgage may rise as high as 5.5% by the end of this year, according to a survey of economists at New Zealand banks by Bloomberg News. One-year fixed mortgage rates are also expected to climb above 5%, more than doubling from their lows last year.

    1. The carnage in these variable rate only countries is going to be breathtaking. Just wait until EVERYONE in Kiwiland is paying 10%.

  15. North Korean state media has announced that the recent North Korean test launch of a Hwasong-17 ICBM also released a small satellite into low earth orbit, broadcasting a continuous message of a recent Kim Jong Un speech titled “Realtors are liars.”

    1. Video: Rand Paul Declares Fauci “A Menace” To Society – Summit News
      https://summit.news/2022/03/24/video-rand-paul-declares-fauci-a-menace-to-society/

      (snip)

      “Appearing on Fox News, Paul stated ‘The thing is if you believe in Dr. Fauci, what you should do immediately is go get stickers and make sure they are on the floor, and a yardstick so you know you are 6 feet away from people.’

      “’And Plexiglas,’ Paul added, ‘carry Plexiglas around with you because Dr. Fauci thinks it somehow, you know, reflects the virus away from you.’

      “’None of what he has been for has worked,’ Paul asserted regarding COVID restrictions.

      “The Senator further urged, ‘the interesting thing is – and he won’t admit this to the public – if you take a sample of blood from 1,000 people in the United States, and you measure to see if they had antibodies to the virus or antibodies to the vaccine, it’s over 95%. That’s why we are doing better with this.’

      “’The virus has mutated to a less virulent or less deadly form. But he won’t admit it because he’s so caught up in putting stickers on your floor, putting masks on your face, putting goggles on you,’ Paul continued.”

      “The guy is a menace, and he has not been right really about anything since the start of this,” Paul urged.

    2. Military Doctor testifies in court that she was ordered to cover up & suppress huge amount of Covid-19 Vaccine injuries

      https://dailyexpose.uk/2022/03/25/military-doctor-testifies-ordered-suppress-covid-vaccine-injuries/

      Dr. Long also testified that the data shows that deaths of military members from the vaccines exceed deaths from COVID itself.

      And let us not forget, that everyone who died after getting the first jab but before being “fully vaccinated” was counted as a Covid death and not as a jab injury. So what percentage of our “1 million Covid deaths” were actually death by jab? We might never know but I will guess that it is more than half.

        1. Used to promote the jab.

          They use what works.

          It was obvious after just a few months that Covid wasn’t the black death they kept telling us it was. As Ben rightly pointed out, there were no “bring out your dead” wagons. Heck, I don’t know of anyone who died of the coof. and I know some really old geezers who were most at risk.

      2. If you remove deaths from vaccines, suicides from depression, spouses murdered due to working from home together, vibrants running amok, and Granny killer Cuomo, there was one guy, Bob in New Jersey, who died of COVID.

      1. It’s The Guardian, therefore I don’t think anything about it. Maybe you should go back to Reddit.

    2. Its never been more obvious that the Corporate owned fake news is the main weapon being used to trick the public into compliance with a power grab take over of US and other Countries.
      The Trump “Russian Hoax”, was when I first became alarmed that something very sinister was taking place . The two impeachments were ridiculous.
      Now look at where we are. Fake and censored news 24/7 with a Puppet in the White House by a criminally rigged election, with Biden calling for US to lead in New World Order.
      Just unbelievable .

      1. That’s from the UK. Are you saying there’s a vast global conspiracy to link Trump to Putin?

        1. I think it’s common knowledge that UK operatives were deeply involved in the Steele Dossier hoax and the whole Russian collusion narrative. Steele himself was former MI6.

          1. A US-based Russian national, Igor Danchenko, was involved and indicted. Democrats, notably Alexandra Chalupa, and Ukraine also worked to sabotage Trump. Is that enough countries to satisfy a global conspiracy?

        2. Well, discredited Christopher Steele is a Brit.
          And if you like at actions (like supporting Nordstream 2, not providing weapons to Ukraine, and limiting US gas production), reporters should be talking about a Putin/Biden axis.

        3. there’s a vast global conspiracy to link Trump to Putin?

          Why not? Both are obstacles to the WEF and the Globalists.

          And right now, the Globalists are leaning hard on Mexico to join the anti-Russia coalition. US ambassador, former senator (Colorado) Ken Salazar has told the Mexican government that it’s current state of neutrality is unacceptable. I see this as a threat to impose sanctions on Mexico unless it complies with the globalist agenda.

          You won’t read about this in the US MSM. And I’ll bet the US is doing this throughout Latin America.

    1. Most families with average household incomes are buying used cars that are more than a decade old, he added.

      When the average new car costs $40K+, this is not surprising. And just wait until most new cars are electric and the average price is even higher.

      And don’t forget, starting in the 2026 model year all new cars will have government controlled kill switches.

      1. all new cars will have government controlled kill switches.
        Plus unable to even start the damn thing if you have had a beer or 2 or only got 2 hours of sleep.
        I plan to buy a 2024 or maybe 2025 car that will hopefully last 10-15 years.

        we will see.

        1. I wonder if a cottage industry will arise to keep pre-2026 cars running for a long time. This could be hard as many new cars have tiny, turbocharged engines to meet the EPA’s CAFE standards. I don’t expect those engines to be very durable, and they will be expensive to replace when they give up the ghost.

          1. It seems easier to create an underground market for disabling kill switches. Or better yet, to keep the perception that a kill switch was actuated when it was actually disabled. I bet those emissions engineers at VW could do it.

          2. It seems easier to create an underground market for disabling kill switches

            I suppose there ought to be a way to hack into where the kill switch code is and reprogram the firmware. If you can isolate the code that disables the car, you could replace the offending code with “no-ops”. But it might require special hardware to do that. Plus I expect it will be highly illegal with mandatory prison time.

    2. I am in used car shopping hell right now. Parallel to the housing market in that there’s no “inspecting” the car because the person right behind you will take it as is and even pay more.

      1. Inventories of used cars have exploded. Keep waiting if you can. Relief is definitely coming in the way of lower prices.

        1. I hope so. Totally stuck at home, catching rare rides from my brother or daughter. I feel trapped. If something doesn’t turn up soon, some old man is going to die 🤣

        2. My son and I just completed the Spring service on my “run around town and never locked” aged Tercel with 330k miles; she’s ready for more, much more!

      2. Mrs Blox was at the Lexus dealer in mid-feb. They wanted MSRP+20% plus another $3k in “fees” for an LS500. This morning he texted us(5 weeks later)… here it is…. and I quote, “my sales manager is now willing to do the deal on the LS at MSRP less $5k.

        We’ll string him along for another $10k-$20k haircut.

  20. If the Great Reset takes place, and New World Order agenda takes place, what makes you think any property rights will be allowed?
    Remember, you will have nothing and be happy.
    I don’t know how exactly they are going to take property rights , but that’s part of the overall plan.

    1. Taxes is one way to do it. Also various permits and other hoop-jumping maneuvers. Or perhaps just decide your property needs to be seized.

    2. what makes you think any property rights will be allowed?

      The current move to seize Russian oligarch property is only going to grow to other “demographics”. Their goal is to be able to seize your property because you’re:

      Racist
      Homophobic
      Transphobic
      Won’t get jabbed
      A member of a religious group that promote “hate”.
      A member of the wrong race.
      Etc.

  21. Re-post from yesterday’s thread.

    Russia Today — Western elites are exploiting the Ukraine conflict to lower the standard of living (3/24/2022):

    “It seems to be a continuation of the trend where you must sacrifice for the greater global good or be ostracized by the thought police.

    It’s impossible to escape the constant undertone of the need to sacrifice for the greater global good or else be viewed as a selfish prick. And now, you risk even worse branding by the thought police if you don’t fall in line with this new outlook: That of a Putin-enabler.

    Since Russia launched its military campaign in Ukraine, Western elites have been arguing that we all must collectively and senselessly concede to lowering our basic standards of living in order to hit back at President Vladimir Putin. In reality, all it does is allow them to continue to profit from our increasingly lowered expectations while all we get in return is the satisfaction of our own virtue signaling.”

    https://www.rt.com/news/552626-ukraine-conflict-living-standard/

    “The media is the enemy of the American people” — President Donald J. Trump

    1. More:

      “This message is brought to us by the same elites who routinely peddle the idea of westerners eating bugs in mainstream media. Ozedemir’s request has nothing to do with Putin or Ukraine and everything to do with this obsession of relentlessly guilting the average person into complying with, and pressuring one another into, lowering their own living standards under the pretext of fighting climate change, or Putin, or whatever other cockamamie excuse they think you’ll accept.

      Meanwhile, Bill Gates, Microsoft co-founder, climate change fighter, and relentless vaccine peddler, has become the largest private farmland owner in the United States and is set up to be one of the big beneficiaries of a meatless future. Particularly when considering that Gates has openly supported genetically modified food production, while the Bill and Melinda Gates Foundation has invested millions into the genetically modified food company, Monsanto, according to NBC News. Other Silicon Valley billionaires are also investing in fake food production, including PayPal founder Peter Thiel and Google co-founder Sergey Brin.

      This makes one wonder if it’s really about sticking it to Putin and not about the wealthy trying to convince you to advocate against your own best interests.”

      Last I checked, I’m a U.S. citizen. I’m not a citizen of the World Economic Forum and I’m not a citizen of NATO.

      Ben, get the ropes ready, cuz we got a lot of globalists that need hanged…

  22. Ok, so it’s starting. Went to the grocery store today and a number of shelves were cleaned out. The pet section was cleaned out. They had a lot of meat however.
    Could it be because Biden mentioned food shortages yesterday? And the guy never follows up on what that will mean. First he was a pimp for Big Pharmacy. Now he’s claiming Putin might release a bio weapon.
    Weapons of mass destruction was a lie that got us into a 20 year war. Enough is enough of these fraudsters.

    1. I sent $315 at Costco today stocking up on non-perishable consumables. Today’s prices will look like sales in a few months.

      2. I stocked up also. I just hope this doesn’t lead to rationing, I hate that. Also, paper plates and stuff like that was cleaned out.

        1. That was just today’s Costco trip. I did a similar trip at Target and have had hubby stocking up on food the last few weeks. Our food saver’s seen quite a bit of action recently. I’m also planting strawberries and tomatoes.

          1. If we weren’t renters waiting to buy, I would have invested in large vegetable planters. Our future home will definitely have vegetable and rose gardens.

          2. large vegetable planters

            I am fortunate to have hundreds of these within walking distance. Even better, on Saturdays they bring their produce down to Main Street not far from my house.

          3. The properties in our neighborhood are typically a little more than an acre with various fruit and scattered macadamia nut trees. Sadly, a relatively recent buyer tore out a number of established avocado trees for a kid’s soccer field. The avocado trees were the best thing about the property! Someone did put up a fruit stand on a corner some time ago. If things get really bad, our neighborhood could have a good produce exchange.

    1. Joe Biden, perhaps accidentally, tells US troops they’re going to Ukraine.

      Or maybe Brandon’s handlers are just messing with Putin’s mind.

  24. “This week, the bank would lend $498,000 for that payment at these rates — that’s down $15,600 or 3% in just seven days”

    Uh, does that mean shack prices will have to crater or does the real estate fairy make up the shortfall?

    1. Robert Earl Keen Tells the Story Behind “The Road Goes on Forever”

      by chris parton
      2/10/2009

      The Bonnie and Clyde-style tale of two lovers against the world has become the anthem of Keen’s career, and the song’s 20th anniversary is this year.

      “The Sonny and Sherry characters are based on real characters that just couldn’t stay out of trouble,” he explains. “And they just, no matter what happened, no matter what fortune fell on them, they would screw that up. That’s where it started from.”

      http://www.cmt.com/news/1604761/robert-earl-keen-tells-the-story-behind-the-road-goes-on-forever/

    1. Markets
      Russian bond yields spike as trading resumes after month-long pause
      Published Mon, Mar 21 20227:07 AM EDT
      Updated Mon, Mar 21 2022 10:44 AM EDT
      Elliot Smith
      Key Points
      – The Central Bank of Russia announced on Friday that trading in federal loan bonds would resume on a discrete auction basis between 10 a.m. and 11 a.m. Moscow time on Monday, and in the usual format between 1 p.m. and 5 p.m.
      – Yields on the benchmark 10-year OFZ ruble treasury bonds spiked 19.7% in early pre-market trade to an all-time high, but had settled to around 13% shortly before official trading was due to begin.
      …
      https://www.cnbc.com/2022/03/21/russian-bond-yields-spike-as-trading-resumes-after-month-long-pause.html

  27. The Financial Times
    Corporate bonds
    Evergrande crisis locks Chinese developers out of global debt market
    Industry’s issuance of dollar bonds slows to a trickle in the first quarter of 2022
    A picture of an Evergrande building
    Issuance of dollar debt has dropped as the property sector suffers from a credit crunch
    © Bloomberg
    Hudson Lockett and Thomas Hale in Hong Kong yesterday

    Chinese property developers’ issuance of dollar debt has come to a near standstill as the escalating Evergrande crisis severs other real estate companies’ access to global capital markets.

    High yield dollar bond issuance by Chinese developers during the year to date is down a record 97 per cent compared to the first quarter of 2021, according to Financial Times calculations based on data from Refinitiv.

    So far just two deals worth less than $295mn in total have gone through, compared with more than $8.7bn in the first three months of last year raised across 30 deals. At the same time, developers’ costs to borrow on international markets has leapt to an all-time high.
    …
    China debt capital markets at one international bank, who added that even larger, more robust developers were beginning to feel pressure from the lack of ready access to global capital markets. “All of them have some debt maturing . . . we’re definitely not out of it yet.”

    The average yield on a Bank of America index tracking Chinese high-yield bonds jumped to 32.9 per cent in March, beyond the previous high of almost 32 per cent in 2008, at the height of the global financial crisis.

    The index is a gauge of international investor confidence about the health of China’s vast property businesses, several of which defaulted last year as part of a liquidity crisis centred around Evergrande.

    Rising yields, which make it more expensive for developers to access the cash they need to run their highly indebted businesses, also signal a significant further deterioration in market sentiment from early February, when they traded close to 20 per cent.
    …

    1. “High yield dollar bond issuance by Chinese developers during the year to date is down a record 97 per cent compared to the first quarter of 2021, …”

      CR8R

    1. WTVB | 1590 AM · 95.5 FM | The Voice of Branch County
      Investors shelter from twin declines in U.S. stocks, bonds
      By Syndicated Content
      Mar 25, 2022 | 3:12 PM
      By David Randall

      NEW YORK (Reuters) – Side-by-side declines in U.S. equity and fixed income markets are pushing investors into cash, commodities and dividend-paying stocks as geopolitical uncertainty and worries over a hawkish Federal Reserve rock asset prices.

      With the first quarter of 2022 winding down, the S&P 500 is down around 5% year-to-date, after falling as much as 12.5% earlier in the year. The ICE BofA Treasury Index, meanwhile, was recently down 5.6% this year, its worst start in history. Investors have traditionally counted on a mix of stocks and bonds to blunt declines in their portfolio, with stocks ideally rising amid economic optimism and bonds strengthening during times of uncertainty.

      That strategy can go awry, however, and market gyrations stemming from Russia’s invasion of Ukraine, soaring commodity prices and the Fed’s hawkish tilt have combined to make it harder to follow the playbook this time around. Though a sharp bounce in stocks has more than halved the S&P 500’s losses for the year-to-date, some investors are wary the rebound may not last and are seeking to cut their exposure. “We are in a perfect storm right now,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management. “We’ve been in periods of heightened geopolitical risk before but this one feels a little different. The negative outcomes could be much more severe and broad.”

      Nixon is increasing stakes in agricultural and energy companies, as well as real estate investment trusts (REITs), which have acted as an inflation hedge in the past. Investors moved $13.2 billion to cash and $2.1 billion to gold over the last week, data from BoFA Global research showed. U.S. stocks saw $3.1 billion in outflows, their largest in nine weeks. The firm’s latest survey showed fund managers’ cash positions earlier this month at their highest since March 2020. George Young, a portfolio manager at Villere & Co, is raising his portfolio’s cash allocation to nearly 15%, well above the typical 3% of assets he normally holds. “Cash is paying literally nothing and is arguably negative because of inflation, but we’re not seeing many things that we want to buy,” he said. Recent declines have “been more painful than many prior bouts of volatility” due to the twin sell-offs in both stocks and bonds, wrote Michael Fredericks, head of income investing for BlackRock’s Multi-Asset Strategies Team, in a note Friday. He is growing more bullish on dividend-paying stocks, which trade at lower forward price to earnings valuations than the broad S&P 500, and are less sensitive to rising interest rates than growth stocks or bonds. Gains have been particularly hard to come by in the bond market, as investors recalibrate their portfolios to a Fed that appears ready to go all-out in its battle against inflation. Yields on the 10-year benchmark U.S. Treasury, which move inversely to bond prices, reached a three-year high of around 2.5% in the past week, with investors now pricing in more than 200 basis points of interest rate tightening this year. [FEDWATCH] With few attractive opportunities in U.S. debt, Anders Persson, head of global fixed income at Nuveen, has recently increased his positions in dollar-denominated emerging market bonds, in part due to the rally in commodity prices. “There is not a clean play-book for a post-pandemic Fed pivot at the same time you have a war between Ukraine and Russia,” he said.

      Investors will be watching U.S. non-farm payroll data next week as they gauge whether the economy is strong enough to handle the Fed’s aggressive rate-hike trajectory. To be sure, some investors believe times of overriding pessimism are ideal for buying stocks, an idea supported by ample evidence of defensive position that has accompanied the S&P 500’s recent bounce. BoFA Global Research analysts said their contrarian Bull & Bear Indicator recently gave a “buy” signal based on outflows from equity and credit and high levels of cash in investors’ portfolios.

      Adam Hetts, global head of portfolio construction and strategy at Janus Henderson, said the largest risk for most investors would be “overreacting to short-term moves” and jumping headfirst into commodities or gold as a hedge against inflation. Hetts is steering clients into higher-quality equities with strong cash flows such as dividend stocks, and seeing increased investor interest in hedge fund strategies that can take short positions. “We’re having a historically bad start to the year, but we’re trying to ensure that the cure isn’t worse than the disease,” he said.

      https://wtvbam.com/2022/03/25/investors-shelter-from-twin-declines-in-u-s-stocks-bonds/

    2. If cash is doing better than risk assets, like stocks and bonds, and inflation is eating the value of cash at a 7% annual rate, what does that say about real economic growth?

Comments are closed.