Idiosyncratic Whisk: March 2020 Yield Curve Update
Well, so much has happened, I hardly need to update the yield curve. Coronavirus has given us one big push into the recessionary outcome th...| www.idiosyncraticwhisk.com
Pulling yolks from the scramble.| www.idiosyncraticwhisk.com
For my latest work, please see my new substack newsletter:| Idiosyncratic Whisk
A few weeks ago, Kevin Drum wrote a blog post that expressed skepticism about "America’s housing crisis." He got quite a bit of pushback against that, so he has followed up with a new post, doubling down on his skepticism.| Idiosyncratic Whisk
Lots of book stuff happening.| Idiosyncratic Whisk
Occasionally, I take a new look at how equities are doing compared to a long-term sine wave. Over the course of the last century or so, real total returns on the S&P 500 follow a sine curve pattern in a surprisingly regular way. I'm just fitting curves here, so I don't want to say too much about it, but it is interesting.| Idiosyncratic Whisk
Some follow-up thoughts on yesterday's post.| Idiosyncratic Whisk
I have good news, or at least not bad news, I guess.| Idiosyncratic Whisk
The yield curve looks pretty good. Long term rates still are recovering. The expected date of the first short term rate hike also appears to be coming closer. This all seems like good news to me. All in all, pretty good monetary management for the COVID-19 recession, I think.It seems to me that a short position in early 2023 Eurodollar contracts has a nice risk/reward balance. Not much room for downside (declining interest rates), but quite a bit of room to run higher (higher intere...| Idiosyncratic Whisk
I haven't updated the inflation numbers for a while. Covid-19 has probably made it difficult to say too much, because there are so many compositional shifts in the demand basket. But I think it is worth taking a look at what is happening in rent inflation.| Idiosyncratic Whisk
The yield curve has taken a strong bullish move as a result of the election and the Covid-19 vaccine progress. The long end of the Eurodollar curve is nearly back to the pre-Covid level.The date of the first rate hike remains in mid-2021, but the escape velocity has increased significantly. Forward inflation breakevens remain level at about 1.6%, which suggests that the recent improvement has been due to real shocks. The Fed probably still has room for more traditional accommodation.| Idiosyncratic Whisk
The yield curve continues to slowly show optimism. The long end of the curve continues to climb. It's now back up above the yields of early April. This suggests that the market foresees continued relatively strong recovery in employment and that the Fed is adequately providing liquidity. Forward inflation expectations have leveled out below 2%, but they are basically as high as they were before the Covid-19 outbreak. That's probably reasonably good news. And, the expected date of...| Idiosyncratic Whisk
There have been a couple of great citations recently of my housing boom work.| Idiosyncratic Whisk
Inflation breakevens continue to rise, slowly. After really flattening out last month, the yield curve perked up in August, somewhat, especially helped by recent Fed discussion about allowing for more catch-up inflation and a more of a symmetrical 2% inflation target.| Idiosyncratic Whisk
Here's a link to a research paper the Mercatus Center has published by me and Scott Sumner.| Idiosyncratic Whisk
Here's a little sneak peak into some work I've been finishing up. This graph shows the number of permits issued for single family homes and multi-unit projects (duplexes on up to high rise condos). The measure is the number of units as a percentage of existing homes. In other words, what is the gross percentage growth in the housing stock, due to single unit and multi unit building. The black lines are the averages among all large metros. The red lines are the averages among the "...| Idiosyncratic Whisk
The Fed is failing us. It started out great. The initial reaction to the pandemic was timely and forceful. The yield curve on March 18 was signaling confidence. But, since then, we have been slowly sinking into stagnation. The long end of the Eurodollar curve is barely over 1% now. It is true that forward inflation expectations have continued to slowly rise, though they are still well under 2%.| Idiosyncratic Whisk
According to the Census Bureau, homeownership shot up by 2.6% just this quarter! Normally, that amount of change would take a decade or more.| Idiosyncratic Whisk
The yield curve remains at about the same place it was a month ago.| Idiosyncratic Whisk
The yield curve (using Eurodollar futures) has undergone a series of shifts with the coronavirus pandemic. In the first graph, we can see that starting from the end of January, the whole curve shifted down by early March. It shifted down more by March 10, as the extent of the pandemic became worse. Then, it steepened over the next week as, across the US, cities, states, and citizens took action.| Idiosyncratic Whisk
The Eurodollar charts are updated through today. The Treasuries chart is monthly.| Idiosyncratic Whisk
This graph from Len Kiefer| Idiosyncratic Whisk
First, just to make it official, my bold coronavirus prediction in the previous post went up in flames. I had hoped that widespread lockdowns would lead to a sharper decline in new cases, but the decline has been less pronounced.| Idiosyncratic Whisk
I haven't been writing about coronavirus here. There are plenty of places to get coronavirus news. But, I have been posting daily updates on Facebook, just doing some basic data analysis, and people there seem to appreciate it, so I figured I'd add a post here.| Idiosyncratic Whisk
Well, so much has happened, I hardly need to update the yield curve. Coronavirus has given us one big push into the recessionary outcome th...| www.idiosyncraticwhisk.com
Pulling yolks from the scramble.| www.idiosyncraticwhisk.com
Pulling yolks from the scramble.| www.idiosyncraticwhisk.com
In 2019, I wrote a 16 part series of posts for the Mercatus Center that laid out a way of thinking about housing affordability. Here are th...| www.idiosyncraticwhisk.com
A couple of quick thoughts on recent home price appreciation. In graph 1, I estimate a national median gross rent/price yield from Zillow r...| www.idiosyncraticwhisk.com
