Rates Continue to Climb with Fed Decision Looming

Rates rise as market prepares for 75bp rate hike. Rates rose across a flattening curve amid fears of potential overtightening by the Fed at the upcoming FOMC meeting. Though a 75 bp hike remains most likely, the market is pricing in for a ~20% chance for a 100 bp move, forcing the 2-year yield to increase ~8 bps to 3.946%. Meanwhile, the 10-year yield rose ~4.5 bps, ending at 3.494% and at one point exceeding 3.50%, the highest we have seen since 2011.

Homebuilder sentiment declines to lowest levels of 2022. The NAHB housing market index released today declined from 49 to 46 MoM, much lower than at the start of 2022 when the index reached 83. This index is based on a monthly survey of market conditions for the sale of new homes, and lower values indicate greater negativity. Rising rates have slowed residential mortgage demand and created an uncertain outlook for homebuilders and homebuyers alike.

Day ahead. 8:30 AM ET data on August housing starts and building permits will headline the day. Later on, crude oil stock changes will be released for the week that ended September 16th. The Fed will begin its two-day meeting.