Economic Update – Fed Look to Trim Balance Sheet, US Car Sales & Mortgages Down, Jobless Claims Decline, more…


On Wednesday April 5th the minutes from the Federal Reserve’s March policy meeting were released. The topic of reducing the Fed’s balance sheet came up for discussion (no more than that at this stage). This is something I debated back in February in a previous blog post (The False Fundamentals Narrative Begins to Envelop the West).

Market Watch: Fed plans to shrink balance sheet this year, minutes show

  • The Federal Reserve is looking to reduce its $4.5 trillion stockpile of government- and mortgage-backed bonds later this year, according to minutes of the March policy meeting released Wednesday.
  • The plan to reduce the balance sheet size is tied to interest rates increasing, the minutes reveal. In their discussion of the path of interest rates, officials supported a gradual pace of rate hikes but said they could change their mind if the economy unexpectedly heated up.

Zero Hedge: Initial Jobless Claims Suddenly Crash By Most In 2 Years

  • Having slowly drifted to the highest levels since before Christmas, initial jobless claims collapsed last week by 25,000 to 234k – near 44 year lows. This is the biggest weekly drop since April 2015…

Market Watch: Mortgage rates fall for the third straight week, approach 2017’s low

  • Rates for home loans notched their third weekly decline, nearing a fresh low for 2017, mortgage finance provider Freddie Mac said Thursday.
  • The 30-year fixed-rate mortgage averaged 4.10%, down 4 basis points during the week. The 15-year fixed-rate mortgage averaged 3.36%, down from 3.39%.

Yahoo: U.S. mortgage activity falls to five-week low -MBA

  • U.S. mortgage application activity hit a five-week low even as home borrowing costs were little changed from the prior week, Mortgage Bankers Association data released on Wednesday showed.
  • The Washington-based industry group said its measure on mortgage applications declined for a third consecutive week. It fell 1.6 percent to 397.1 in the week ended March 31.

Bloomberg: U.S. Car Demand Collapse Jeopardizes Trump’s Auto Factory Push

  • Ford Fusion: down 37 percent. Chevrolet Malibu: down 36 percent. Toyota Prius: down 29 percent.
  • As those grim numbers suggest, the U.S. auto industry was blindsided last month by just how fast sedans have fallen out of favor with Americans now embracing roomier sport utility vehicles. Family-friendly crossovers may be more profitable, but the quick shift is causing headaches.
  • Industry wide deliveries in March were supposed to show a rebound following small dips in January and February. But the annualized sales pace, adjusted for seasonal trends, slowed to 16.6 million vehicles, from 16.7 million a year earlier, according to researcher Autodata Corp. Analysts had projected the rate would accelerate to about 17.2 million.

USA Today: Congress races toward April deadline to avert government shutdown

  • House and Senate negotiators of both parties are racing to reach agreement on a spending package to prevent a government shutdown on April 28.
  • Members of the House and Senate Appropriations committees intend to have a bill ready the week of April 24, just days before the current stopgap funding for federal agencies is set to expire, House Appropriations Committee spokeswoman Jennifer Hing said Monday. The timeline is especially tight because lawmakers are scheduled to be in session only about a dozen days between now and the midnight April 28 deadline.
  • President Trump has complicated their work by sending over a controversial emergency request for $30 billion in extra funding for defense programs and $3 billion for border security, including $1.5 billion for his proposed wall on the U.S.-Mexico border. He would partially offset the cost with $18 billion in unspecified cuts to domestic programs —  a trade-off that Democrats and some Republicans oppose.

Zero Hedge: China Starts 2017 With Highest Number Of Corporate Defaults In History

  •  Seven companies have defaulted on a total of nine bonds onshore so far in 2017, versus 29 for all of last year, according to data compiled by Bloomberg. In a sign of the struggles facing China’s old economic model, most of them depend on heavy industry and construction. While it’s still far from a crisis point, the defaults shows how policy makers’ efforts to reduce the liquidity that had propelled the bond market until late last year is exacting casualties.

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