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Treasury Yields Continue to Climb with Hike Expectations

Housing Starts Struggle Post-Hurricanes

The Commerce Department’s report on US homebuilding headlined a light day of economic data reporting.  Housing starts during the month of September declined 4.7% to a seasonally adjusted rate of 1.127 million units — the lowest level in the past year.  Much of the weakness was attributed to the impact of hurricanes Harvey and Irma, as starts in the South tumbled 9.3% to a 2-year low of 527,000.  Overall, new construction on single-family homes declined 4.6% while multi-family starts dropped 5.1%.  Also detailed in the report, building permits fell 4.5% last month, weighed down largely by the multi-family component (-16.1%).

 

 

Corporate Earnings Boost Stocks

The DJIA jumped more than 0.75% to a new record high during today’s trading session, driven by a 10% surge in IBM shares after the company reported better-than-expected Q3 earnings.  Overall, it has been a strong start to corporate earnings season, with 81 percent of the companies that have already reported beating estimates.  With today’s bump, the DJIA closed above the psychological milestone of 23,000 for the first time ever.  On the year, all three of the major stock indices have risen more than 10%.

 

 

Treasury Yields Climb Higher

US Treasurys sold off for a third consecutive day, with yields/swap rates increasing 1-6 bps across the curve in a bear steepening pattern.  The 10-year note yield is currently trading near its highest level in a week at 2.35%.  The decision on the next Fed chair remains a central theme in bond markets, with President Trump expected to announce his decision before November 3rd.  Current frontrunner John Taylor has led traders to believe a tighter path for monetary policy is in the future, and the probability for a December rate hike has risen to over 80%, as per Fed Fund futures.

 

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