Thread by @Mayhem4Markets

A meaningful decline in consumer sentiment, and a softening of retail spend may portend to a compression in lending, softening related income streams. Important to watch if this trend continues, along with a reduction in homebuying demand, and auto unavailability/price increases.

In fact, business and consumer borrowing has already meaningfully slowed post-COVID crisis, which is one reason there has been such strong demand for Treasuries.

nytimes.com/2021/08/25/bus…

We also see mortgage origination demand slowing, this comes after homebuyer sentiment was among the worst on record.

morningstar.com/news/pr-newswi…

"A second-quarter consumer survey showed that many remained cautious about adding to their debts, with 21% of respondents planning to apply for new credit or to refinance existing credit in Q2, down from 26% in the first quarter."

investmentexecutive.com/news/research-…

After binges we often see consumers pull back. The June credit boom was likely due to a combination of pent up 'revenge spend', travel demand, spending related to new home purchases, and other related consumption activities. It's not surprising to see the same drop off in time.

As a result, with consumers in more debt than they were at the peak of the last credit cycle, a decline in debt demand is a logical conclusion in the intermediate to longer term, followed by the potential for deleveraging as debts are paid down/defaulted on.