There is a lot of concern over an impending recession. The Treasury yield curve is signaling an impending recession, but the short-end of the curve is heavily manipulated by The Federal Reserve. In the past, a negative yield curve slope precedes recession by several months, and the 10Y-3M curve is now negative. Is a recession just around the corner?
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However, credit markets are not showing any impending crashes in volume. Real estate lending never recovered from The Great Recession primarily due to regulator oversight by the Consumer Financial Protection Bureau and increased bank capital requirements.
If we look at non-agency mortgage delinquency rates, they are declining rapidly. Even as home price growth is slowing.
If we look at Fannie Mae and Freddie Mac serious delinquencies, they are very low (but still higher than pre-2007 levels).
So despite the impending recession hysteria (and a downward sloping yield curve), credit markets are not signaling recession.
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