Interest payments on US government debt are soaring
source: Markets & Mayhem
Swiss inflation slows further as SNB mulls september rate hike
Swiss inflation slowed to the lowest rate in one and a half years, testing the determination of SNB officials who have signaled that a further tightening step in September is likely.
Consumer prices rose 1.6% in July from a year earlier, down from 1.7% the previous month.
Source: Bloomberg, Swiss Fed statistical office
Robinhood now makes much more collecting interest on client cash than from its core business.
This is $234 million that RH's customers should be collecting but they are currently handling to the Trading App. Source: www.zerohedge.com, Robinhood
US interest expenses have surged by about 50% in the past year, to nearly $1 trillion on an annualized basis
Source: Lisa Ambramowicz, Bloomberg
US Treasury 10-Year yield increases to highest level since november 2022
Treasuries fell across the curve, pushing the 10-year yield to the highest level since November as traders digest an uptick in US government issuance, a sovereign credit downgrade and a stronger-than-expected private job report.
Source: Bloomberg
Only 11% of US household debt has an adjustable interest rate
That means the vast majority of Americans with existing fixed rate mortgages/auto loans/student loans have not been impacted by the Fed's 11 rate hikes. Source: Charlie Bilello
ECB raised rates by 25bps as expected
Deposit rate to 3.75pct, higher since April 2001. The main refinancing rate is now 4.25pct, highest since 2008. It is the 9th consecutive hike in a cycle that started exactly one year ago. APP portfolio is declining at a measure and predictable pace. Balance sheet should thus continue to shrink By stating that inflation Is coming down but is staying above target for an extended period means that the ECB keeps the door open to further rate hiles. A slight tweak in the statement: the ECB interest Rates will be SET at sufficiently restrictive levels for as long as necessary … (instead of BROUGHT at sufficiently…) NEW: the ECB decided that going forward, the minimum reserves banks need to hold won‘t receive any interest. In this way, the ECB could prevent the losses of the ECB and the national central banks from increasing too much. Bank shares like DB drop following the News Source: Bloomberg, HolgerZ, www.zerohedge.com
Albert Edwards from SG explains in one chart why this time is different and how the rise #interestrates hasn't triggered a recession yet.
Indeed, as shown on the chart below, Corporate NET interest payments as a % of post-tax economic profits (red line) has been going DOWN despite Fed Funds (black line) going UP! Edwards frames it as such: "We can see clearly from the Fed’s Z1 (table L103) that the US corporate sector is a massive net borrower. Normally when interest rates rise, so too do net debt payments, squeezing profit margins and slowing the economy. BUT NOT THIS TIME. Corporate net interest payments have instead collapsed (...) something very strange has happened, and it helps explain the recession’s tardy." So what has happened? As Edwards concludes, a sizeable proportion of the "huge, fixed rate borrowings during 2020/21 still survives on company balance sheets in variable rate deposits" meaning that corporations continue to benefit from locking in the ultra low rates of 2020 and 2021 even as their cash interest income are soaring. Indeed, as the SocGen strategist adds, "companies have effectively played the yield curve in reverse and become net beneficiaries of higher rates, adding 5% to profits over the last year instead of deducting 10%+ from profits as usual". Putting it all together, Edwards says that "it’s not just ‘Greedflation’ that has boosted US profit margins and delayed the recession (...) Interest rates simply aren’t working as they once did. It is indeed a mad, mad world" Source: www.zerohedge.com, SocGen
