The Institutional Risk Analyst

When the short end obeys and the long end shrugs, that is not policy talking. That is premium, charging by the day. And the plan carries a twist it did not price: the investment boom that is supposed to pay the mortgage is, for now, bidding against the Treasury in its own bond market, hundreds of billions of buildout raised from the same institutional pool that must absorb the wall. The exit ramp charges a toll on the road that leads to it.

The first point to make is that neither of these banks is a particularly good financial performer. WAFD is a bottom quartile performer vs Peer Group One and has reported a lot of noise of late in areas like securities losses. WAFD makes its way in life as a small regional bank by keeping low expenses. When we visited the bank years ago during our time leading bank ratings at KBRA, the CEO talked about his predecessor turning off every other lightbulb in the bank’s Seattle of

The difference between the Western markets that settle predominantly in cash and Asian markets where physical delivery is the norm is fundamental. A growing number of global central banks are moving their physical gold out of the US because of the erratic behavior of Donald Trump. They fear expropriation of their gold by a future government in Washington.

When the price of gold rises what is really happening is that the value of fiat currencies is falling. The rout ongoing in the bonds of the various industrial nations suggests that the dollar and all of its subsidiary currencies are in big trouble. Yet none of these democratically elected governments are willing to take steps to arrest the decline in their credit standing, namely raising taxes and reducing public spending.

Bank of America CIO Michael Hartnett notes that it is imperative for the Bessent/Warsh combo to stop higher US Treasury yields, since long duration trades are working ”too well.” We view such talk as wishful thinking from the Sell Side of the market. There is no way for the Treasury to force LT yields down, thus the only alternative is for the Fed to 1) raise ST interest rates and 2) restart quantitative easing (QE), an eventuality that will signal surrender on the fight aga

Federal Housing Finance Director William Pulte reappeared on X this past week, promising “decisions” on highly technical areas like loan level pricing adjustments (LLPAs) for Fannie Mae and Freddie Mac. But could director Pulte expound further on just why LLPAs need to be changed at this point in the home price cycle? After all, most home prices are falling.

The fact that Secretary Bessent felt the need to make an announcement of increased bond buybacks in front to the 20-year auction suggests that the Treasury is expecting more weak auctions going forward. How else do we explain Bessent’s behavior? But more important, when will President Trump and Secretary Bessent stop pretending that the situation in the Treasury debt market is not a problem?

As the war with Iran continues to fester, we suspect that there will eventually be a majority on the Federal Open Market Committee to raise short-term interest rates – whether or not Warsh joins the majority or even votes for the move. With the Treasury running a fiscal deficit of 6% of GDP, we think the FOMC has little hope of slowing inflation but may soon be dealing with a slowing economy -- this despite the massive fiscal stimulus.

Some observers think that United Wholesale Mortgage Corp (UWMC) collapsed into the arms of Oaktree Capital Management because they erroneously hedged Two Harbors, a company they ultimately did not buy. But this is wrong. UWMC collapsed because the CEO, Mat Ishbia, extracted hundreds of millions of dollars in cash from a company that was never really profitable. UWMC was run for volume, not profits. Indeed, his aggressive strategy compressed profits across the entire mortgage

People in the private credit trade will tell you that raising new money is almost impossible. Why? Because there are growing signs of contagion in the insurance sector after years of dubious business practices by insurers controlled by private credit firms. As details of some of these situations emerge, we suspect that the mainstream media will become more engaged.

Over the past 30 days, both gold and silver prices have experienced a notable upward trend, recovering from mid-July dips to close higher in early August near $4,340–$4,400/oz for gold and $63–$64/oz for silver, driven by shifting Federal Reserve policy outlooks and economic data. As rising inflation pressures LT interest rates, we expect to see both gold and silver prices recover from the July lows. As attention increases to the deteriorating fiscal situation of the US...

We think the board of UWMC has a duty to ask for the resignation of the current CEO Mat Ishbia, should ask Howard Marks, Chairman of Oaktree, to chair the board, and should commence a search for a replacement CEO or pursue a sale. The magnificent loan funnel created by some refugees from Flagstar for Mat Ishbia has enormous value, but the current management instead seems intent upon destroying value at every turn.

Banks face a market in 2H 2026 where inflation is going to rise and prices for on-the run securities will likely fall. But the wall of money that has been manipulating individual technology stocks with impunity for months is going to go somewhere. In a world where the US Treasury is actively manipulating ST interest rates and arguably selling volatility, where do you hide?

What it says to me is every institutional portfolio has to think about holding some gold, if they want to protect themselves against extremes of default risk, some allocation permanently to gold. Now, should it be 3% or 4% or 5%? I don’t know. We can do what the europeans are doing and go 50% into non-dollar assets. In other words, we are in dollars. So, the only way to address US default risk is for us to own gold or something else. Because for us to own the CDS in dollars

Large private credit/equity firms have taken control of many life and annuity insurers over the past decade, transforming them into higher risk, less transparent insurers. For the record, most of the for-profit insurers are also higher-risk, less transparent entities; but generally, not as extreme as the carriers controlled by private credit and private equity sponsors.

We have enormous respect for Nierenberg and his team, but wonder why they don't make some obvious adjustments in the business model. For example, NLY has 20% of its capital in agency MSRs and focuses on agency mortgages and MBS, RITM has one of the largest MSR portfolios in the industry and yet is transitioning away from residential mortgages in pursuit of a multi-asset strategy. The result is a business profile that is a challenge to define...

The key point to make about gold and backwardation isn't a gold price correlation to interest rates, but a gold basis correlation to interest rates. The basis spread is far more important than the price level when we talk about gold. I argue that we'll get to a point where essentially gold withdraws its bid on the dollar entirely. And gold goes into permanent backwardation more than a devaluation of money the backwardation of gold really represents a collapse in trust in the

Treasury Secretary Scott Bessent stated early in the Trump Administration that expanding the stablecoin market will create a "surge in demand for US Treasuries, which back stablecoins," but he was clearly mistaken. Growth in stablecoins has slowed dramatically as the value of bitcoin and other tokens has plummeted. Notice that Bessent has not had much to say on the subject of stablecoins recently as Treasury yields have steadily risen.

As we noted some time back, whenever the pseudo conversation in Washington regarding inflation (a/k/a “affordability”) becomes difficult, the BLS and/or the Fed moves the goalposts. Just as nobody in Washington wants to talk about the budget deficit or the impending collapse of Social Security, the conversation about inflation is totally contrived and false.

The renewed fighting between the US and Iran again jeopardizes global oil supplies, after stockpiles were drained earlier in the conflict, Reuters reports. “We’ve burned through all of the buffers we had. Everything,” one trader told the Financial Times. Energy markets had some slack to absorb the first shock, but that cushion is “smaller and shrinking further.” We continue to be concerned about shortages of refined products and particular grades of petroleum in 2H 2026.