by Mish

Before looking at the chart below, where do you think rates are relative to January 2014? Up, down, or sideways?

Change Since January 2014

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The 2-30 spread flattened by a whopping 181 basis points in just over two years.

The 2-10 spread flattened by 149 basis points.

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A flattening of the yield curve is not good for bank profits. Rising 10-year yields since mid-2016 are not good for mortgages or housing affordability.

Not to worry, despite poor economic reports, Fed governors have stated: “This is a surprisingly strong economy.”

Surprisingly Strong Economy Links

  1. March Rate Hike Odds Surge to 80 Percent: New Standard for “Surprisingly Strong” Economy
  2. Inflation-Adjusted Spending Declines Most Since September 2009: Stagflation Coming?
  3. Construction Spending Unexpectedly Declines One Percent
  4. New Home Sales Rise Half of Economists’ Expectations, Supply Surges
  5. 4th Quarter GDP Unexpectedly Undershoots Consensus: What’s Ahead?
  6. Trade Deficit Unexpectedly Widens: Exports Sink, Imports Up Sharply
  7. GDPNow 1st Quarter Forecast Plunges to 1.8% Following Personal Income and Outlays Report

Somewhere in that set of links, there is hidden “surprising strength”. I leave it to the reader to find the surprises and report back.

Mike “Mish” Shedlock

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