Inflation Reduction Act, Housing Data Highlight Otherwise Quiet Session

Rates largely unchanged despite the release of negative housing start data. U.S. housing starts fell 9.6% MoM to an annual rate of 1.446M in July, a mark far below the forecast of 1.57M. The housing sector has been losing steam with increasing prices of materials and mortgage rates. Despite this data, rates markets had a relatively quiet session, with no swap maturity seeing a change larger than 1 basis point on the day. Industrial production data was reported in line with forecasts, with annualized production figures for July coming in at 3.9%. The 10-year Treasury yield ended the day only modestly higher at 2.80% while the MOVE Index (a popular measure of interest rate volatility) climbed off its recent lows to end the day at 116.

“Inflation Reduction Act” was signed into law. President Biden signed the Inflation Reduction Act today, which includes nearly $440 billion of spending. Of that,~$370 billion is being invested in energy, security, and climate change. Though the act is not truly expected to reduce inflation levels significantly, it is projected to increase corporate tax revenue by ~$740 billion. A large portion of this total will come from the newly imposed 15% corporate minimum tax, as well as prescription drug pricing reform. Equities closed higher on the day after Walmart and Home Depot reported results that beat estimates, the S&P 500 climbing 0.71%.

Day ahead. We’ll get updated business and retail inventory data along with retail sales figures for the month of July in the morning tomorrow. The Fed’s meeting minutes from the last FOMC meeting will be released at 2:00 PM. The Fed’s Michelle Bowman will make public comments at 8:30 and 2:00 PM ET.