Rates Fall After Four Days of Sell-Off

Swap rates and Treasury yields pull back modestly after several days of gains. Rates declined for the first time in four sessions, pulling back 1-3 basis points across the curve. The 10-year Treasury yield, which reached as high as 1.56% yesterday, closed at 1.52%, but is still up over 20 basis points from a month ago. US equities were somewhat buoyed by the decline in rates, the S&P 500 grinding 0.16% higher on the day.

Pending U.S. home sales hit a seven-month high, while rent prices have skyrocketed across the U.S. The National Association of Realtors’ pending homes index increased 8.1% month-over-month in August after contracting for the previous three months. The increase in August was the highest level in seven months as inventory has started to pick up and prices have moderated, albeit from record price levels. Meanwhile, renters continue to pay up as August rents were up 11.5% year-over-year, with some U.S. cities seeing +25% rent increases. Recent data out of New York City showed that some landlords have increased rents 70% from the prior year as more people move back to the city post-pandemic. Home and rent prices are starting to be seen in inflation data, rising shelter costs materializing as a significant factor in last month’s CPI release.

The Congressional Budget Office has estimated that the U.S. Treasury may run out of money as early as late October. The nonpartisan CBO’s report commented that the Treasury is on pace to run out of cash, including any special measures to avoid a payments default, by late October or early November. The proposed timeline is in-line with Treasury Secretary Yellen’s projection of October 18^th who also added that any delay of U.S. debt payments would be “catastrophic.”