Market Matters

 

The biggest piece of news this week is the price action in the 10-year, as it has pushed and stuck above 4%. It's interesting, the 10-year was under 3% two-months ago, just shows how fast the bond market has adjusted to the inflation data that has come in, the Fed rate hikes and the forward guidance from the Fed. With financial conditions tightening so quickly, the fear is that rates have gone up too quickly. The good news is that as the Fed continues to raise rates, eventually the long duration US treasuries, specifically the 10-year and 30-year, their yields should fall due to the Fed instilling credibility that it will tame inflation and bring it back down to 2% that we've seen since the Great Financial Crisis.

Initial Jobless Claims

Initial Jobless Claims have exceeded expectations once again, now initial claims are at 214k (mkt 230k), and continued claims are at 1.385 mn (mkt 1.375 mn). After a brief surge in initial fillings, we are now seeing a slight slowdown. Last week's numbers saw some revisions as well - initial claims for last week were 226k (was 228k), and continued claims were at 1.364 mn (was 1.368 mn). The four-week moving average is at 212.25k, a slight increase from last week's 211k.

 

Housing Starts

Housing Starts for September came in at 1.439mm, which is a slight miss from the expected 1.461mm. Looking at housing starts MoM, they are down 8.1%, which is larger than the expected drop of 7.2%. Building permits came in at 1.564mm, which is slight beat than market expectations of 1.53mm. Looking at Building permits MoM, they were up 1.4%, which is a slight beat from the expectations of a drop of 0.8%. "I highly doubt that we are nearing a bottom in housing starts," Stephen Stanley, chief economist at Amherst Pierpont Securities LLS, said in a note. "There is most likely more pain to come."

 

Existing Home Sales

Almost in line with the consensus of 4.70 mn, the existing home sales came in at 4.71 mn for September. In August, the sales were at 4.78 mn (revised from 4.80 mn). September marks the eighth consecutive month of declines in existing home sales, with the last decline of 1.5% MoM. The annual rate of change in house sales now equals -23.8% YoY. According to The National Association of Realtors, the housing sector continues to go through turmoil and adjustment to the rising interest rates. The standard 30-year fixed mortgages are now approaching 7%, which weighs heavily on demand.

 

Mortgage Applications

Mortgage Applications for the week ending October 14th came in -4.5% WoW, compared to the prior week's -2.0%. The Refinance Index was down 6.8%, while the Purchase Index was down 3.7%. "Mortgage applications are now into their fourth month of declines, dropping to the lowest level since 1997, as the 30-year fixed mortgage rate hit 6.94 percent – the highest level since 2002," said Joel Kan, MBA's Vice President and Deputy Chief Economist. "The speed and level to which rates have climbed this year have greatly reduced refinance activity and exacerbated existing affordability challenges in the purchase market."