"If mercy's a business, I wish it for you"

The sharp rally in US treasury futures yesterday is being reflected in the cash market today with the 10 yr yield down 12 bps to 4.68% after Fed vice chair Philip Jefferson and Dallas president Lorie Logan joined some of their colleagues in recognizing that the long end of the yield curve has tightened monetary policy further for them. For some reason, Michelle Bowman still believes that more rate hikes are needed in spite of the long rate jump. The 10 yr future is down slightly this morning. 

As earnings reports are about to flood in, I'll say again what I say every quarter, it's a guarantee that about 75% of companies will exceed earnings estimates which Pepsi did this morning (I didn't see them break out revenue growth between price and volume).

"If mercy's a business, I wish it for you" once sang the Grateful Dead in 'Fire on the Mountain' and yesterday in a letter, the National Association of Home Builders, the National Association of Realtors and the Mortgage Bankers Association are singing that song in a letter to the 'Honorable Jerome Powell, Chair.' They want mercy from the interest rate pain they are all experiencing and now expressing. They write to "the Board of Governors of the Federal Reserve System (hereinafter 'the Fed') to convey profound concern shared among our collective memberships that ongoing market uncertainty about the Fed's rate path is contributing to recent interest rate hikes and volatility. This has exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing."

What does this group want? "We strongly urge the Fed to make two clear statements to the market: 1)The Fed does not contemplate further rate hikes; 2)The Fed will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized." This is quite the lobbying effort.