Behind the Market Headline News

The financial chaos and sudden downward spiral of global economy have created a wide spread fear in the market places that the impending risk is the possibility of deflation as Japan had experienced in the last decade. This left "real" yield on current 5 yr treasury TIPS at 2.293%, about 29 bps HIGHER than the nominal yield on its big brother, 5-yr treasury note, which was traded at about 2.00%. The yield differences between 5 yr note and TIPS reached at par about a month ago and have steadily declined into negative territories (see the Bloomberg chart below). The spread for 10yr sector also collapsed from long term historical average 210 bps to only a few basis points above zero according to Bloomberg data. What market offer now for investors is you can lock-in at least 2.20% "real" yield if the security is hold until maturity and if there is any positive inflation comparing to the negative "real" yield for the nominal treasury notes. The only risk to hol...

The headline news of this morning's NAR reports on US existing home sales did not paint a pretty picture at all for current US real estate markets. The existing home sales tumbled to the lowest level since data was compiled in 1999. The median home price dropped more than 6% from previous year. The report seems providing no indications the ending of housing market slide. However, if there was any silver lining from this report, it was the single family home prices had stabilized and actually on a gradual climb monthly since the 1st quarter. The chart below depicts single family median and average price monthly change since the end of 2007. As the chart showed that home price dipped the most in Jan, then had been increasing month over month since. News media picked up the headline numbers of y-o-y declining 6.1% for median price and and 16.7% drop in total sales. But it is quite evident that entering the second quarter this year the speeds of declining home price had decelerated sig...