Before looking at the chart below, where do you think rates are relative to January 2014? Up, down, or sideways?
Change Since January 2014
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.
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
- March Rate Hike Odds Surge to 80 Percent: New Standard for “Surprisingly Strong” Economy
- Inflation-Adjusted Spending Declines Most Since September 2009: Stagflation Coming?
- Construction Spending Unexpectedly Declines One Percent
- New Home Sales Rise Half of Economists’ Expectations, Supply Surges
- 4th Quarter GDP Unexpectedly Undershoots Consensus: What’s Ahead?
- Trade Deficit Unexpectedly Widens: Exports Sink, Imports Up Sharply
- 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