Morning Report: Housing starts rise

Vital Statistics:

 LastChange
S&P futures4,37320.2
Oil (WTI)70.670.35
10 year government bond yield 1.32%
30 year fixed rate mortgage 3.07%

Stocks are rebounding after yesterday’s Evergrande-related sell off. Bonds and MBS are flat.

The FOMC meeting begins this morning. The decision will be released tomorrow at 2:00 pm.

While no change in rates are expected at this week’s FOMC meeting, the consensus seems to be that Jerome Powell will give the market the official heads up that the bank will start reducing bond and MBS purchases. Given the Evergrande issue, the Fed has to make sure that it doesn’t freak the markets out too much. If the dot plot shows rates rising in late 2022, then that could be a problem. So far, the Fed Fund futures have a better-than 50% chance of a rate hike by the end of 2022.

Housing starts rose to 1.62 million in August, which came in above expectations. This is up 3.9% compared to July and is 17% above a year ago. Starts increased in the Northeast, South and Midwest, but declined in the West. Building Permits also rose to 1.73 million. This is up 6% on a MOM basis and 13% on a YOY basis.

Banks are beginning to consider “blue-lining” or refusing to lend to flood-prone areas. Since we have national flood insurance, and government-guaranteed loans I suspect this is more for show than anything else. The term itself (reminiscent of redlining) kind of gives away the game. That said, there is a no-bid risk for VA loans, so that could conceivably be a factor.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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