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Damn You 7%!
Bad news for America's teeming scores of landless peasants: The cost to finance a cheap, hastily constructed wooden box erected on a parking space-sized parcel is back above 7%.
That's according to the latest read on the MBA's index, which showed a 10bps jump over the week.
As the figure below shows, that counted as the largest increase since April 24.
Recall that rates slipped below 7% for the first time in months in June as long-end Treasury yields retreated ~50bps from YTD highs. Now we'
According to Nick Gerli, inventory is going up quickly and prices are crashing in spec housing markets. Pretty interesting how variable the housing market is down to region, state, municipality, neighborhood.
Meanwhile, China is about to do some version of QE. A very interesting version – they are basically short-selling their own government bonds.
https://amp.cnn.com/cnn/2024/07/03/business/china-bond-market-bank-crisis-svb-intl-hnk
So how does it work, if you’re a Chinese bank and have loaned Chinese govt bonds to the Chinese govt who then short-sold them? If the bond yield rises and price falls, as the government wishes, the value of your bond declines. Does that hit your balance sheet? Does the government make you whole? Or does the government adjust your regulatory minimums? If the yield falls and price rises, does the government have to cover the short? If you need cash, can you end the loan and sell your bond? Are these questions all as fictional as the notion that your institution is anything but an appendage of the government?