Another central bank is buying gold.

April 7 (King World News) – “The appearance of global spikes in govt. debts or inflation concerns further increase the importance of gold in national strategy as a safe-haven asset and as a store of value. As a result of this decision, the country’s gold reserves have been raised from 31.5 tons to 94.5 tons.” — Hungary National Bank

Peter Boockvar:  After hearing from Fed President Mester Monday and Kaplan today with Evans and Barkin also speaking today, there is still no direct commentary from them on the red hot US housing market. In fact, what we’ve heard so far is that the economy still needs the same level of policy accommodation which implies that Mester and Kaplan wants to continue to throw gasoline on the housing market.

Evans and Barkin will echo the same theme. 10% home price gains I guess is not fast enough. That said, it doesn’t matter anymore what they think because the market has raised rates for them with the rise in longer term rates and in turn mortgage rates. We’ll get the FOMC minutes from the meeting three weeks ago but after hearing from so many members since, including Powell, don’t expect anything new…

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The ECB is beginning to think about when it will be their time to slow down asset purchases. Governing Council member Klaas Knot said today:

“If the economy develops according to our baseline, we will see better inflation and growth from the 2nd half onwards. In that case, it would be equally clear to me that from the 3rd quarter onwards we can begin to gradually phase out pandemic emergency purchases and end them as foreseen in March 2022.” 

If the Fed also starts to taper in the back half, we could have a really interesting summer and fall in the world’s bond markets and not in a good way. To this, Governing Council member Wunsch of the ECB said yesterday “I hope that at some point we’re going to discuss an exit, because it will show that our policy is effective. But exit is never a piece of cake.” It’s not like watching paint dry either. 

With the 3 bps rise in the average 30 yr mortgage rate to 3.36% after last week’s 3 bps drop, mortgage applications fell w/o/w. Purchases declined by 4.6% w/o/w and down for a 2nd week. While they are still up 51% y/o/y, that is purely an easy comparison thing. Refi’s fell for the 8th week in the past 9, by 5.3% w/o/w and are down 20.4% y/o/y. Refi’s were the initial reaction to the drop in rates one yr ago while purchases took a pause with all of us locked down.

Refi’s are now the obvious immediate causality to the uptick in mortgage rates. With respect to purchases, rates are still low and buyers are getting a sense of urgency to act before the possibility of another leg higher in mortgage rates. But, aggressive price increases along with the mortgage rise is enough to pause transactions, especially with so little inventory.

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