Bond Market Update

Data Recon

• Housing starts in June were down 2.0% month-over-month to a seasonally adjusted annual rate of 1.559 million (Briefing.com consensus 1.598 million) while building permits -- a leading indicator -- were down 0.6% month-over-month to a seasonally adjusted annual rate of 1.685 million (Briefing.com consensus 1.680 million).
• An upward revision to housing starts in May helped mitigate the headline miss for June, but the key takeaway from the report is that permits for single-family homes declined across all geographic regions. In turn, single-family starts were down in all regions, except the small Midwest region (+2.1%) that accounted for less than 12% of total single-family start in June.
  • The change in single-unit starts by region: Northeast (-12.7%); Midwest (+2.1%); South (-2.9%); and West (-25.4%).
  • The change in single-unit permits by region: Northeast (-14.8%), Midwest (-9.8%); South (-5.0%); and West (-13.2%). Multi-unit starts increased 10.3% month-over-month while multi-unit permits increased 11.5% month-over-month.
  • The number of units under construction at the end of the period increased 0.3% month-over-month to a seasonally adjusted annual rate of 1.680 million. That left the Q2 average 5.4% above the Q1 average, so it will be accounted for as a positive input in Q2 GDP forecasts.
• Yield Check:
  • 2-yr: +1 bp to 3.17%
  • 3-yr: +2 bps to 3.17%
  • 5-yr: +3 bps to 3.10%
  • 10-yr: +3 bps to 2.99%
  • 30-yr: +1 bp to 3.15%