Market Digests Turkey, Household Debt Rises

 

Risk Assets Rebound

After several days of declines driven largely by concerns over the Turkish economic crisis spreading, the equity markets generally rebounded today. This is partly due to the news that Turkish Treasury and Finance Minister Berat Albayrak will participate in a conference call with foreign investors on Thursday.  All three major US equity indices closed higher on the day.  The NASDAQ and the S&P 500 climbed 0.65% and 0.64%, respectively, while the DJIA increased 0.45%.   US Treasuries sold off 1-3 bps across the curve, with the 10yr US Treasury Note closing at a yield near 2.90%, 2bps higher than where it closed yesterday.  In foreign exchange markets, the US Dollar (USD) posted gains of 0.6% vs the Euro (EUR) and 0.5% against the British Pound (GBP).  The Turskish Lira (TRY) stopped its slide and posted a gain of 8.2% against the USD.  Crude oil futures rose marginally on the day, gaining 0.1%, to close at $67.24/barrel.

 

 

Households Take on More Debt

According to the Federal Reserve Bank of New York, who today released the quarterly report on Household Debt and Credit, households increased their debt load during the second quarter.  Overall, borrowing was up 3.5% from the same period a year earlier to $13.3 trillion, while mortgage borrowings were also up 3.5% over the same periods to $9 trillion.  The majority of the new debt was in mortgages, mostly taken on by borrowers with strong credit scores – 58% of new loans went to borrowers with a credit score of 760 or higher.  Credit card debt was up 1.7% to a total of $829 billion as of 06/30.

 

Despite more aggregate debt being incurred, there was a decrease in the percentage of loans that are becoming delinquent.  According to the report, 2.3% of loans became delinquent during the second quarter.  Much of the improvement in delinquency rates can be attributed to student loans which have improved significantly over the past year.  Wilbert van der Klaauw, senior vice president at the New York Fed commented, “While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans.”