Morning! This is MF Lending - the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

Here’s what we’ve got for you today:

1. Bill Ackman’s Tweets Move Markets…here’s what happened last week 🕊️

2. Busy Financial Week Ahead…what to watch for 🐝

By the way, this article on OER Driving Inflation is the most clicked link in this newsletter, you should check it out if you are interested.

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Rates Today 📉

Bill Ackman’s Tweets move markets…here’s what happened last week 🕊️

This is billionaire hedge fund owner Bill Ackman - and his bets move markets.

In August, Ackman announced that he was shorting 30-yr treasury bonds as he was expecting inflation to stay “persistently high”.

This means that he is betting the price of treasury bonds would fall which happens when treasury yields (and rates) are going up - an inverse relationship.

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Think of it like this, imagine you buy a contract or “IOU” from the government that says “in 2 years, I (the government) will pay you (the owner) a 4% return on your money. That 4% is your “yield”.

Now fast forward 6-months, as interest rates rise - let’s say to 5% - the government is now issuing contracts saying “I will pay you (new buyers) a 5% return”.

[The government sells these contracts in auctions in large batches.]

Now the 4% contract you purchased earlier that is still active but is worth less - because the government will pay you a 4% return when the market today is getting 5%.

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So, Ackman makes this bet and he is right, the Treasury yields skyrocket between August and today. The price of treasuries peaks over 5% last week for the first time since 2007.

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A week ago - on Monday - Ackman sent these three tweets

This broke the US Treasury market in a single day.

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Ackman is taking his winnings off the table and cashing in his short position after just 3 months.

He is now saying that due to the Isreal/Hamas war and the recent rise in treasury yields, that offshore investors will rush to US Treasuries which are widely regarded as the safest investment on the planet.

When this happens, natural supply and demand pressures come into play. As money floods into treasuries, the price of those existing treasuries rise.

Ackman believes that “the economy is slowing faster than the data suggests.” He believes the narrative that the CPI, PCE, and Inflation all have lagging data that has not been seen in the data.

The result of this dude’s tweet was the largest 30yr bond fall since Mid-May.

The reverse in his short position tells me one thing - Ackman thinks this is the beginning of the end - and he’s putting hell of a lot of money behind that bet.

That could not only mean that we have reached the peak of rates (around 8.125%) but also that we are closer to rates turning around (Q2/Q3 of next year).

Are you with him or fading him? Let me know in the comments.

Busy Financial Week Ahead 🐝

This week will be extremely important, and volatile, in the bond market.

Tuesday:

• ISM Manufacturing PMI

• Case Schiller Home & FHFA Home Price Data

• Chicago PMI

Wednesday:

• FED Meeting ☕ - Join us on Instagram Live (@mf.lending) for live analysis and initial impact of the meeting

• JOLTS Data (Jobs)

Friday:

• Non-Farm Payrolls

• Unemployment Rate

All of these reports tend to move markets on their own - but they are all coming in a single week.

According to the CME FedWatch Tool - there is currently a 98% chance that the Fed will hold interest rates where they are on Wednesday.

The question - as always - will be how Jerome Powell’s speech and press conference.

Some like Roger Ferguson believe JPow will keep the door open for a December hike.

Other’s think he may confirm the ceiling for rates is in.

Whichever camp you find yourself in, expect several swings in the bond market this week. Follow us on Instagram - @mf.lending - for daily updates so you can stay in the loop.

The Cul-de-Sac

Thanks for reading - that is all we have for today 😎

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— Michael F DiLucchio