🐂 At a premium

Markets

Stocks experienced a decline yesterday due to the ongoing increase in bond yields. The elevated activity in the bond market has led to a significant rise in the 30-year fixed mortgage rate, reaching 8% for the first time since the year 2000. These elevated interest rates are causing a substantial decrease in the demand for mortgages.

Jerome Powell Signals Fed Will Extend Interest-Rate Pause

Federal Reserve Chair Jerome Powell has indicated that the recent surge in long-term Treasury yields might enable the central bank to temporarily halt its series of interest rate hikes, as long as recent progress in managing inflation continues.

Powell's statements during a Thursday midday address in New York closely mirrored those of his colleagues who had suggested in recent days that they would keep short-term interest rates stable at the upcoming meeting on October 31-November 1. This decision is partly influenced by the rapid increase in long-term interest rates over the past month, which could act as a substitute for another rate hike by the Federal Reserve if elevated borrowing costs persist.

On Thursday, yields on the 10-year Treasury note came close to 5%, closing at 4.987%, marking a new 16-year high compared to the previous day's 4.902%. The stock market saw a widespread decline, with the Dow dropping by 251 points.

Powell remarked, "We need to observe how this situation develops, but at the moment, it's clearly leading to a tightening of financial conditions." The primary objective of raising interest rates is to "impact financial conditions, and the current increase in bond rates is indeed causing financial conditions to tighten."

When long-term interest rates rise, they affect a range of borrowing costs, from mortgages and auto loans to business debt. In recent days, U.S. mortgage lenders have been offering rates close to 8% for 30-year fixed-rate loans, a level not seen since 2000.

Government

Still no house speaker

The House of Representatives finds itself in a situation reminiscent of a friend who insists on using the "iPhone-in-a-bowl" party trick. It remains without a Speaker, and the latest attempt by Ohio Republican Jim Jordan to secure the top position failed in a second round of voting. This has left the GOP divided on the next course of action, leaving the House without a clear leader.

Jordan fell short by 18 votes in his bid to replace former House Speaker Kevin McCarthy, receiving two fewer votes than he did in the initial vote on Tuesday. This suggests that support for Jordan's nomination might be declining. With all House Democrats voting for House Minority Leader Hakeem Jeffries (a total of 212 votes), there is little room for disagreement among the 221 Republicans.

So, what's the next step?

The most likely option is to hold another round of voting, possibly multiple rounds. In January, it took five days and 15 rounds of voting for McCarthy to finally secure the speakership. Jordan anticipates a third floor vote at noon ET today.

While some GOP members have suggested taking negotiations off the floor and returning when the votes are assured, California Republican Mike Garcia believes this won't work. He proposed that House Republicans take some time off-site, perhaps at a place like Gettysburg, to reconnect with their purpose and values.

As a potential quick fix, there's a growing idea to grant Speaker Pro Tempore Patrick McHenry, a Republican from North Carolina, more authority than just overseeing the voting for a new speaker. Republican Rep. Mike Kelly introduced a resolution to temporarily delegate some of the speaker's powers to McHenry, such as advancing critical bills through the House.

This urgency is further fueled by the fact that important aid packages for Ukraine and Israel are currently in a state of uncertainty. Additionally, the House is running out of time to pass a budget, with the looming deadline now set for November 17. The absence of a Speaker could have significant implications, potentially affecting initial public offerings (IPOs) and data releases needed by the Federal Reserve for making crucial rate decisions.

Politics

Biden vows support for Israel during visit

At the conclusion of his visit to Israel, the president stated that U.S. intelligence supported Israel's claim that the Gaza hospital bombing, which had sparked anti-Israel protests in the region, was the result of an errant rocket fired by the militant group Palestinian Islamic Jihad. This assertion has also been backed by independent security experts.

During President Biden's visit, Israel agreed to permit humanitarian aid to enter Gaza through Egypt, and it was noted that Egypt was ready to allow up to 20 trucks loaded with supplies to cross the border. Additionally, the U.S. pledged to provide $100 million in humanitarian assistance to Gaza and the West Bank, alongside an "unprecedented" defense package for Israel.

While offering support, the President also issued a word of caution to Israel, drawing a parallel to the U.S. experience after 9/11, urging them not to let their actions be driven solely by anger.

Healthcare

Health insurance gets a decade-high price hike

According to a recent survey conducted by the private health foundation KFF, the average cost of employer-offered health insurance plans experienced a 7% increase this year. Family plans now stand at $23,968, while individual plans are at $8,435.

This surge, the highest since 2011, can be attributed to inflation, elevated wages for healthcare professionals, and the consolidation of hospital systems, as noted by health policy experts. The implications of this increase are significant for both employers and the 150+ million Americans who rely on employer-based insurance:

• For family plan-holders, this equates to approximately $500 more in out-of-pocket expenses, while solo insurance holders face an additional $75, further straining consumer spending power, which is already under pressure due to stagnant wages struggling to keep pace with high inflation.

• Employers typically absorb a significant portion of the rising healthcare costs to remain competitive, avoiding passing the burden onto their employees. This is likely the reason why deductibles haven't seen substantial growth in the past five years.

• Unfortunately, the situation may deteriorate further, as one in four companies surveyed by KFF revealed their intentions to increase employees' premium contributions in the next two years.

Travel

United tries to fix airplane boarding

United Airlines is giving its passengers in window seats a bit of extra time to enjoy the view or immerse themselves in music, with a new boarding process. Beginning on October 26, the airline will board passengers in economy class window seats before those in middle and aisle seats. This change is aimed at expediting the boarding process, as per an internal memo.

It's worth noting that this doesn't mean window-seat passengers skip the line entirely. Priority groups such as active duty military personnel and individuals with disabilities will continue to board first, followed by first class and business class passengers.

However, United hopes that by prioritizing window seat passengers when it's time for general boarding, they can reduce the overall boarding time per flight by up to two minutes. While two minutes may not seem like much, in the aviation industry, every minute counts as an aircraft at the gate isn't generating revenue. Speeding up the boarding process, even by a small margin, across thousands of flights daily can result in significant time savings and contribute to passenger satisfaction, potentially making them more inclined to choose United for future travel.

In a broader context, experts in plane boarding techniques acknowledge that boarding window seats first is a step in the right direction, but it's not the most efficient method for filling a plane. There are more optimized methods that can further streamline the process, as demonstrated in various resources, including YouTube videos.