Bond Market Update

Data Recon

• The Conference Board's Consumer Confidence Index dropped to 95.7 in July (Briefing.com consensus 96.4) from a downwardly revised 98.4 (from 98.7) in June. This is the third straight monthly drop in confidence. In the same period a year ago, the Consumer Confidence Index stood at 128.9.
• The key takeaway from the report is that the sharp drop in the Present Situation Index is consistent with a weakening growth outlook at the start of the third quarter; meanwhile, the Conference Board notes that a reading below 80.0 for the Expectations Index suggests recession risks continue to persist.
  • The Present Situation Index fell to 141.3 from 147.2 in June.
  • The Expectations Index dipped to 65.3 from 65.8 in June.
• New home sales declined 8.1% month-over-month in June to a seasonally adjusted annual rate of 590,000 units (Briefing.com consensus 670,000) from a downwardly revised 642,000 (from 696,000) in May. On a year-over-year basis, new home sales were down 17.4%.
• The key takeaway from the report is that new home sales were the weakest in the largest regions (the South and West) as higher mortgage rates and higher prices created affordability pressures for prospective buyers. Tellingly, new home sales in the West (which has the highest concentration of higher-priced homes) were down 36.7% month-over-month.
  • The median sales price increased 7.4% yr/yr to $402,400 while the average sales price jumped 5.8% to $456,800.
  • New home sales month-over-month/year-over-year by region: Northeast (-5.3%/-37.9%); Midwest (+42.3%/-22.1%); South (-2.0%/-8.7%); and West (-36.7%/-32.9%).
  • At the current sales pace, the supply of new homes for sale stood at 9.3 months, versus 8.4 months in May and 5.8 months in June 2021. A six-month supply is typically associated with a more balanced market.
  • The percentage of new homes sold for $399,999 or less accounted for 50% of new homes sold versus 40% in May and 46% one year ago.
• Yield Check:
  • 2-yr: -4 bps to 3.00%
  • 3-yr: -3 bps to 2.94%
  • 5-yr: -7 bps to 2.83%
  • 10-yr: -8 bps to 2.74%
  • 30-yr: -6 bps to 2.99%