Housing starts and permits exceed expectations

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Published Date 10/18/2024

Yesterday MBS prices declined; weekly jobless claims were lower than thought, September retail sales were much stronger than forecasts at 0.3%, reported +0.4%; ex vehicles thought to be +0.1% month/month increased 0.5%, excluding vehicles the forecasts were +0.3% but jumped 0.7%. The increase jumped from 0.1% in August. Reaction to the better data sent the 10 year note up 7 bps, the 2 year +3 bps and MBS prices down 29 bps.

Also yesterday the ECB cut its base rate by 25 bps as expected, the third cut this year. The ECB inflation rate cooling quicker than in the US, now at 1.8% with ECB’s target the same as US 2.0%.

Overnight the 10 year note traded above its technical support at 4.10% to 4.12% but when US trading began the note dropped back to 4.09% unchanged form yesterday.

The only data today, September housing starts and permits; starts expected at 1.400 million reported at 1.354 million, August revised from 1.356 million to 1.361 million. Starts of houses with five units or more sank by 4.5% from the previous month, which totaled an annualized rate of 317 thousand, while starts of single-family homes rose by 2.7%, equivalent to an annualized rate of 1.027 million. Among different geographical regions, starts fell in the south (-3.4% to 738 thousand), the West (-10.1% to 257 thousand), and the Midwest (-9.1% to 179 thousand). On the other hand, housing starts rose sharply in the Northeast (57.9% to 180 thousand).

Permits expected 1.500 million reported at 1.428 million. Approvals of units in buildings with five units or more tumbled by 10.8% to a rate of 398 thousand and single-family authorizations went up by 0.3% to 970 thousand. Across different US regions, there were decreases in permits in the Northeast (-13.1% to 126 thousand), the Midwest (-2.9% to 200 thousand), and the South (-6.1% to 765 thousand), while increases were reported in the West (10.9% to 337 thousand).

There is a litany of Fed officials speaking today including Atlanta Fed President Bostic.

At 9:30 am the DJIA opened -50, NASDAQ +102, S&P +13. 10 year at 9:30 am 4.07% -2 bps. FNMA 5.5 30 year coupon at 9:30 am +4 bps from yesterday’s close but 7 bps lower than 9:30 am yesterday.

Source: TBWS

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