Taking hardship distributions is NOT a sign of excess savings
December 9, 2022
–Yields regained much of Wednesday’s decline, with tens up 9 bps to 3.493%. Curve edged slightly steeper; on the ED curve reds -9.0, greens -10.625, blues -12.625. 2/10 spread +2.7 to -81.7.
–In front of today’s PPI data, crude oil (CLF3) broke to a new low for the year. In January, CLF3 was 108 and yesterday late it was 71.48, down over 50 cents. PPI expected +7.2 yoy vs 8.0 last, Core 5.9 vs 6.7 last. Also released today is Q3 Z.1 report, the Fed’s ‘flow of funds’ quarterly data. The press typically focuses on Household Net Worth as the main component of this release, but there is a lot of useful data contained on debt, etc. In any case, with respect to Net Worth, this tidbit from Vanguard reflects stress: (From CNBC)
‘401k ‘hardship’ withdrawals hit record high…another sign households feel the pinch of inflation’. About 0.5% of workers participating in a 401k took a hardship dist in October…while a relatively small percentage, it’s the largest share on record dating to 2004…
–Another interesting news clip this morning says that China is telling large (state owned) insurers to buy bonds, as yields have risen. Money has been flowing out of bonds and into stocks on the relaxation of covid rules.
https://www.zerohedge.com/markets/china-quietly-launches-qe-beijing-orders-large-insurers-buy-bonds-contain-selling-panic
–CPI Tuesday and FOMC Wednesday, with 3, 10 and 30 yr auctions crammed into Monday and Tuesday next week. Implied vol has been quite directional, moving higher on the move to lower yields, but retreating yesterday as yields rose.
