Strong US Housing Data and Supply Weigh on Treasuries

Stocks fluctuated while Treasury yields and swap rates sold off across the curve as investors digested better-than-expected US housing data and mixed corporate earnings.  Housing starts jumped 6.5% in September to an annual rate of 1.21 million, above the 1.14 million consensus estimate.  The increase was fueled by an 18.3% rise in multifamily units (apartments and condominiums), but single-family units also rose.  A separate report showed building permits fell 5% to an annual rate of 1.1 million, but home construction figures can be volatile and are often subject to revisions.  Housing starts and building permits are up 12% and 13%, respectively, year-to-date, and indicate that underlying housing demand remains strong.  The National Association of Realtors releases existing home sales data on Thursday of this week.

Data including yesterday’s widely scrutinized reading of Chinese GDP remains under a microscope leading up to next week’s FOMC meeting.  China reported growth of 6.9% in the third quarter, the slowest quarterly expansion since 2009, but above the 6.8% growth economists were expecting.  The headline number appeared strong (too strong) given the weakness of other recently reported Chinese data, and economists are skeptical over the report’s accuracy.  This wouldn’t be the first time Chinese data was called into question, and it makes it difficult to assess the outlook for global growth if the world’s second largest economy’s data is deemed unreliable.

Aside from the data, markets will watch the corporate issuance and earnings calendar, as well as Fed speakers including Dudley, Powell, and Yellen.