US DATA: A Surprising, And Rare, Dip In House Prices In March
House prices were surprisingly soft back in March, with both the FHFA and S&P CoreLogic 20-city measures recording their first simultaneous seasonally adjusted decline since Aug 2022. It comes as existing home sale relative supply has recently increased to its highest for the time of year since 2016 although these FHFA /S&P Corelogic series still see reasonable Y/Y increases.
- FHFA house prices surprisingly dipped -0.05% M/M (sa, cons 0.1%) in March after a downward revised 0.02% (initial 0.14%), for its first monthly decline since Aug 2022.
- S&P CoreLogic 20-city -0.12% M/M (sa, cons 0.2%) in March after an unrevised 0.40% M/M, its first monthly decline since Jan 2023.
- Recent run rates are still reasonable considering the build in relative supply of inventories to sales in both existing and new home sales data. Whilst new home sales relative supply has been high for some time, existing home sale inventory has recently increased with the 4.0 months of sales back in March the highest for that month since 2016, a trend that held more recently in April at 4.4 months.
- The S&P Core Logic 20-city measure is still up 4.1% Y/Y, and with a 3m/3m run rate a touch stronger at 4.4% annualized, although the FHFA series is a little softer at 3.7% Y/Y and 3.1% 3m/3m annualized.
- A reminder that these metrics are 53% (S&P) and 55% (FHFA) higher than pre-pandemic levels.
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US TSYS: Extraordinary Measures And Cash Look Sufficient To Head Off X-Date
Treasury has about $164B in "extraordinary measures" available as of April 23 to avoid hitting the debt limit, per its regular report out Friday. That's out of a maximum total of $375B (they have used $211B).
- With Treasury cash looking healthy (around $600B), that's a fair amount of dry powder to get through the summer months to wait out the debt limit impasse. Tax receipts have looked strong with tariff revenues also starting to boost cash flows, further reducing the near-term urgency to adjust bond issuance.
- This has also helped push back analyst “x-date” expectations to later in the summer/September. We expect to hear from Treasury about its own x-date assumptions next week.
US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)
- Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
- Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11.
FED: Ex-Gov Warsh: Fed Has Failed To Satisfy Price Stability Remit
From our Washington Policy Team - Some fairly sharp words today from ex-Fed Governor Warsh on the central bank (who for what it's worth is seen by betting markets as by far the frontrunner for the next Fed Chair):
- The best way for the Federal Reserve to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission, former Fed Governor Kevin Warsh, a leading contender to replace Jerome Powell as chair next year, said Friday.
- "I strongly believe in the operational independence of monetary policy as a wise political economy decision. And I believe that Fed independence is chiefly up to the Fed," Warsh said in a speech at a Group of Thirty event on the sidelines of the IMF meetings. "Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending." His speech made no mention of Trump's tariffs or the appropriate monetary policy to deal with them.
- He said the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.
"We should care little about two numbers to the right of the decimal point in the latest government release. Breathlessly awaiting trailing data from stale national accounts -- subject to significant, subsequent revision -- is evidence of false precision and analytic complacency," he said.
"Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words. Fed leaders would be well-served to skip opportunities to share their latest musings."
