Grant Ellison

The 10yr closed on Friday at 4.86%, back to where it was before the September selloff. The Fed delivered a 25bps hike in between. Same yields, 25bps more policy, and the forward path priced now sits below the one priced in early September. The Tape №13: scndordereffects.substack.co…

Week ahead: October CPI on Tuesday, and it is the last one the Fed sees before December. November CPI prints on December 10, a day after that meeting ends. So Tuesday is the final inflation reading that can move a decision still sitting in the low 70s.

Here’s one I’d like other people’s read on. Core PCE says 3.1%. Trimmed mean says 2.3%. Q3 annualized says 2.1%. Same agency, same release week. If you had to put one number in front of a committee deciding rates next month, which one and why?

New homes for sale that haven’t been started hit an all-time high last month: 115k of the 476k on the market. Under construction is 22% below the cycle peak. Builders are selling houses that don’t exist yet and waiting for a signature before they dig.

Took the 911 out for the last decent weekend of the year. Top down, 45 degrees, heat on. There is no version of this that makes sense on a spreadsheet and I have stopped trying to build one.

Trimmed mean PCE was 2.3% over 12 months and 2.4% over six, against core at 3.1%. The trim removes whatever is extreme. The Dallas Fed also warns that when prices skew positive the trim cuts too much off the top and understates. Both halves of that are worth holding.

Something I keep running into: every housing series answers a different month. Pending contracts lead closings by 30 to 45 days. Permits lead starts by whatever the builder decides. Case-Shiller is a three-month average reported with a two-month lag.

Treasury bought $6bn of par for about $3.84bn of cash last week. One 2051 bond went at 52.4 cents. The discount is arithmetic, since a 1.875% coupon in a 5% market is worth about half. Reported debt falls because it’s counted at face. Economically nothing was retired cheaply.

Really amazing to me how much absolute fascism is being spewed by those who claim to be anti-fascist. Putting opponents in jail, seizing companies and assets, etc. Truly a wild time to be alive. What has happened to our country? For one, our education system has very obviously failed... I feel terrible for how badly our young adults in particular have been hoodwinked.

Payrolls 165k against a 65k consensus, unemployment down to 4.1%, participation up to 61.9%. Strong print. One series inside it went the other way. U6 rose from 7.6% to 7.9%. The gap between U6 and the headline rate widened 40bps in a single month, to 3.8pp.

Payrolls tomorrow. The thing I’d watch is the revision to the prior two months rather than the headline. Last year’s benchmark took 79k off total nonfarm, and 178k off private, with government revised the other way. The monthly print is the least reliable part of the release.

Wages rose 3.1% over the last year. Headline PCE rose 3.6%. Real compensation went backwards, and that’s before you get to the fact that benefits grew 3.9% while the paycheck line grew 3.1%. Employers and employees are seeing very different things.

PMMS 7.18%, down 6bps and the third straight weekly decline. 7.40 to 7.32 to 7.24 to 7.18. Twenty-two basis points over three weeks works out to about $60 a month on a $400k loan. The rate is still 96bps above where it sat a year ago, which is worth $255 a month.

Initial claims 189k against a 197k consensus. Four-week average down to 194.75k. Continuing claims 1,718k, up 23k and above consensus. Nobody is getting fired. The ones who do lose a job are taking longer to find the next one, and this part is what stalls a home purchase.

Rental vacancy printed 7.6% for Q3, up from a year ago and statistically significant. Homeownership is 65.5%. Both of those move the same variable, which is why holding vacancy against any single historical average tells you more about the average than the market.

Immigrants from the 2022-24 surge rent overwhelmingly in small and medium buildings. 70% are in properties under 50 units. Other renters split much more evenly. So a demand shock there lands on small private landlords and barely touches the institutional product.

Rental vacancy hit 7.6% in Q3, the highest since 2014. Asking rents have accelerated every month since the spring. Those two don’t usually happen together. Either rents are repricing a thin margin while the stock loosens, or one series is wrong. SOM №3: scndordereffects.substack.co…

Housing is no less affordable today than at the October 2023 peak, even with prices higher. Rates are 29bps lower and median income rose 8.5% over those three years. That offset a 3.8% rise in home values almost exactly. SOM №3: scndordereffects.substack.co…

Treasury renewed the buyback schedule: up to $70bn of off-the-run purchases next quarter for liquidity support, plus $25bn in the 1-month to 2-year bucket for cash management. The standing long-end bid that filled four straight $6bn operations survives.

MBA’s 30yr has fallen three weeks running, 7.50% to 7.30%. Applications over those same three weeks: −5.3%, +3.4%, −1.2%. Twenty basis points of relief and the composite is net lower than where it started.