Daily Market Color

Dollar Up On Higher Treasury Yields


Existing Home Sales Rise

According to the National Association of Realtors (NAR) the number of previously owned homes sold in the month of March  rose to a four month high.  Homes sold at an annualized rate of 5.6 million homes beating the estimate of 5.55 million and increasing by 1.1% MoM from the annualized number in February.  It seems that of the homes that sold during the period about half were on the market for less than 1 month.  The market supply still remains very low, given that the current pace of sales would require just 3.6 months for all of the houses on the market to change hands.  In addition, affordability remains an issue while first time home buyers made up 30% of the transactions — down 2% from the same period last year.  Tomorrow we will get more housing data as new home sales figures are released.


10-Year Yield Nears 3%

For the past four years the yield of the on the run 10 year Treasury note has not breached the 3% threshold.  We are now closer to that level than we have been in a very long time and this could indeed have larger implications for the broader market.  For one thing, if the trend continues, expect borrowing costs to continue to rise.  This could also lead to a stronger dollar, bringing foreign investors’ money and dollar repatriation back into the US market.  While higher rates and a stronger dollar could also lead to higher commodity prices, potentially leading to a cycle where inflationary pressure also builds.


Limited Movement in Equity Markets

Major US stock indices were mostly flat on the day as the market continues to digest the implications of a 3% yield on the 10 year US Treasury note.  All three major indices closed within 0.25% of where they opened the day with the Nasdaq and DJIA losing 0.25% and 0.06% respectively and the S&P gaining 0.01%.  US Treasurys sold off on the day, as yields/swap rates were up 1-2bp across the curve.  The 10-year note yield was up 1.5 bps closing at a yield of 2.975% — the highest levels it has closed at in four years .  The US Dollar was up again today vs other major currencies, its fifth day in a row, closing up 0.7% vs. the Euro (EUR) and up 0.4% vs. the Pound (GBP).  Oil also traded up with NYMEX WTI Crude closing +1.4% at $68.64 on the renewed strength of the dollar and new unrest in the Middle East.

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