Daily Market Color

Rates Rise on Eve of Fed Rate Decision

Previewing Fed’s rate hike. The Fed will announce its rate hike decision tomorrow, with a 75 bp rate hike effectively priced in and an outside chance of a 100 bp move. Rates continued to sell off in anticipation of the hawkish Fed, the 2-year note nearly eclipsing 4% and the 10-year Treasury yield again surpassing the 3.50% level, ending at 3.567%. Equally important will be Fed Chair Jerome Powell’s ensuing press conference, where a strongly hawkish or dovish tilt could have a significant impact on future rate expectations.

U.S. residential housing starts exceed forecasts. Housing starts hit 1.58mm in August, up 12% MoM compared to 1.45mm in July. Increased housing starts mean more new homes are being built, and the increase was a slight surprise given higher rates. In contrast, new building permits declined to the lowest level since June 2020 at 1.52mm annualized, reflecting the mounting pressure in the construction space.

Day ahead. The Fed announces its interest rate decision at 2:00 PM ET, which will be followed by a press conference at 2:30 PM ET. Existing home sales data for the month of August is set to be released at 10 AM ET.

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