Stocks are higher this morning on lower oil prices and bond yields. Bonds and MBS are up.
The US increased sanctions on Iran but stopped short of targeting Iran’s biggest ally, China. The measures have been dubbed “Economic D-Day” which includes targeting countries that launder oil revenues for Iran (their own currency is worthless, so they have to transact in other dollarized currencies). “We want to make clear here today that no one is above the reach of U.S. sanctions,” Bessent said when asked if the administration would target Chinese banks, or if it would avoid doing so in order to preserve relations with Beijing. Supposedly this will affect crypto as well.
“If they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted,” Bessent said. These sanctions will also target suppliers to Iran, including aviation and technology. Of course the wildcard is crypto and if Iran is selling oil for crypto assets it can escape the brunt of the sanctions. At the end of the day, the US needs China to tell Iran to knock it off targeting ships in the Strait of Hormuz.
The countries most affected aside from Iran (i.e. their biggest trading partners) are Iraq, Turkey, China, India and the UAE.
Economic activity decelerated in July according to the Chicago Fed National Activity Index. Personal consumption and housing indicators drove the decline in the index. Production and sales were modestly positive while employment was modestly negative. The CFNAI is a meta-index of some 85 leading and lagging economic indicators and is intended to give a 30,000 foot view of how the economy is faring.
Single-family rents were up 1.5% on a YOY basis according to Cotality. “National single-family rent growth increased to 1.5% in June, marking the fourth consecutive month of stronger annual gains and the highest growth rate since late 2025,” said Molly Boesel, senior principal economist at Cotality. “While rents are rising a bit faster than they were earlier this year, the market remains much different from the rapid growth environment seen in recent years. Pricing performance continues to vary across both regions and price tiers, with higher-end rentals posting stronger gains than lower-end properties. At the local level, Midwestern markets continue to lead rent price growth, while some Sun Belt markets remain comparatively soft. Overall, June’s results point to a market that is slowly increasing rather than broadly accelerating.”
The hip=to-be-square trade continues. Note that on an inflation-adjusted basis real rents have been decreasing:
