US 10-year bond yield over 3% as Greece 10-year bond yield falls below 4%; US 2-year bond yield hits 2.5%

US bond yields have soared recently with the 10-year bond yield hitting 3% today (up 0.66% over the past year), the highest since January 2014. The 2-year bond yield topped 2.5% (up a massive 1.18% over the past year), the highest since July 2008. Meanwhile, the Greece 10-year bond yield was lower than 4%, closing at 3.99% (down 2.45% over the past year), the lowest since 2005. Continue reading “US 10-year bond yield over 3% as Greece 10-year bond yield falls below 4%; US 2-year bond yield hits 2.5%”

Here’s how house prices in the European Union have changed between 2008 and 2017

Based on data from Eurostat, here are key takeaways about house prices in the European Union between 2008 and 2017,

  • 18 of the 28 countries that are part of the European Union saw house prices fall
  • 10 of the 28 countries that are part of the European Union saw house prices rise
  • Only 4 countries have seen prices rise over 10% during the entire period
  • 14 countries have seen prices fall over 10% during the entire period
  • Romania (-48.77%), Greece (-42.84%) and Spain (-30.50%) were the 3 worst performing countries for house prices
  • Sweden (+55.72%), Austria (+39.57%) and Luxembourg (+32.41%) were the 3 best performing countries for house prices
  • The average house price across the European Union fell 6.98% between 2008 and 2017
EU house price change 2008 to 2017, Source: Eurostat
EU house price change 2008 to 2017, Source: Eurostat

Continue reading “Here’s how house prices in the European Union have changed between 2008 and 2017”

This is what has happened to the unemployment rate in the US four to eight months before every recession since the 1940s and why it matters now

The US Bureau of Labor Statistics data reveals that the US unemployment rate has a hit a new multi-year low four to eight months before the start of every recession since the 1940s. In other words, the economy hits full employment four to eight months before the start of a recession.

The graph below might help visualise it better (the shaded areas indicate recessions),

US unemployment rate 1948 to 2018
US unemployment rate (shaded areas indicate recessions); Source: U.S. Bureau of Labor Statistics

Why does this matter now? Continue reading “This is what has happened to the unemployment rate in the US four to eight months before every recession since the 1940s and why it matters now”

Weekly Overview: ECB sells yet another corporate bond after spotting an error; US Banks report Q1 results; Facebook moves user data from Ireland to the US

ECB sells yet another bond after spotting an error

The European Central Bank (ECB) via Bundesbank has sold yet another bond issued by Telefonica Deutschland a year after it bought it. The bond which was due to mature in 2021 breached an ECB rule that they should not hold bonds that pay a step-up coupon (one that could go up in value if certain conditions are met – in this case if the company was acquired).

This was the fourth time they found an error in 2018 and sold a corporate bond. When this happened a couple of weeks ago, we reported it here and asked how many more errors will the ECB find? Well, it would appear traders have taken notice. The ECB sold this bond just after a sharp fall in the price of the bond, implying traders know what all bonds the ECB has bought in error and is likely to sell. Continue reading “Weekly Overview: ECB sells yet another corporate bond after spotting an error; US Banks report Q1 results; Facebook moves user data from Ireland to the US”

US consumer and commercial debt hit record highs but charge-off and delinquency rates remain at low levels

Here is the debt outstanding for all commercial banks in the US (all data as of March 31, 2018),

Total consumer credit including student loans $3.9 trillion (up from $2.6 trillion in 2008)
Total commercial and industrial loans $2.15 trillion (up from $1.5 trillion in 2008)
Commercial real estate loans $2.1 trillion (up from $1.6 trillion in 2008)
Mortgage Backed Securities $1.76 trillion (up from $800 billion in 2009)
Student loans $1.5 trillion (up from $500 billion in 2008)
Consumer credit cards and other revolving credit $775 billion (up from $400 billion in 2008)
Mortgage debt $1.32 trillion (down from $1.42 trillion in 2008)

Total Consumer Credit Outstanding:

US Total Consumer Outstanding, All Commercial Banks
Source: Board of Governors of the Federal Reserve System (US)

Continue reading “US consumer and commercial debt hit record highs but charge-off and delinquency rates remain at low levels”

ECB asks Deutsche Bank to estimate the cost of winding down its investment bank; Spain’s sovereign debt upgrade; Canadian bond yields rising most amongst the G20

The European Central Bank (ECB) has asked Deutsche Bank to estimate the costs of winding down its trading operations. Apparently Deutsche Bank is the first bank that has been asked to run this exercise, but others may follow.

How complex is Deutsche Bank? Continue reading “ECB asks Deutsche Bank to estimate the cost of winding down its investment bank; Spain’s sovereign debt upgrade; Canadian bond yields rising most amongst the G20”

Here’s how banks in the US earned over $25 billion in 2017 by lending money to the Federal Reserve and why that number could double in 2018

Banks in the US can hold excess reserves with the Federal Reserve. In 2008, as part of the Emergency Economic Stabilization Act of 2008 it was mandated that interest would be paid on reserve balances held with the Federal Reserve. What is of significance is the interest rate on excess reserves.

Since 2015, the Federal Reserve has set the interest rate on excess reserves equal to the top of the target range for the federal funds rate. Why is this important? Look at the graphs below.

Excess Reserves of Depository Institutions
Excess Reserves of Depository Institutions; Source: Board of Governors of the Federal Reserve System (US)

Continue reading “Here’s how banks in the US earned over $25 billion in 2017 by lending money to the Federal Reserve and why that number could double in 2018”

Weekly overview: Oil prices hit 3-year high; US 2-year Treasury yields highest since September 2008; Subprime is making a comeback

Oil prices closed at $67.39 on Friday, gaining 8.6% during the week and hitting a 3-year high. Like we covered here, the impact of oil prices is being felt with oil dependent companies like airlines already seeing margins squeezed.

Meanwhile, US 2-year Treasury bonds hit a high of 2.373%, the highest since September 9, 2008 (if the date sounds familiar it was just 5 days before Lehman Brothers entered Chapter 11 administration). Continue reading “Weekly overview: Oil prices hit 3-year high; US 2-year Treasury yields highest since September 2008; Subprime is making a comeback”