Market 09/19: Bond yields break highs across the board

US bond yields hit highs

US 2-year Treasury yield rises to 5.05% - highest since June 2007. One year ago, this yield was 3.85% and two years ago 0.23%.

US 5-year Treasury yield rises to 4.50%, 10-year to 4.34%. Yields on both tenors hit highest since 2007.

Housing data shows mixed outlook

New home starts drop sharply in August (down 11.3% from previous month, much lower than expected -0.9%). However, building permits rise 6.9% from previous month (expected -1.1%).

Seasonally adjusted new home starts hit lowest since June 2020 and building permits reach highest since October 2022.

Multi-family starts drop most in over 2 years, while single-family permits continue to rise for 8th straight month.

Although building permits rise, builder confidence drops sharply.

NAHB confidence index at 5-month low (down 11 points in 2 months).

Builder sentiment weakening over past two months coincides with mortgage rates rising above 7%, significantly weakening buyer purchasing power.

On the supply side, builders continue to struggle with labor shortages, land shortages, and equipment. Labor demand is near peak. This could push home prices higher and hinder buyers.

Read more on housing affordability at here.

Builder confidence weakening across the board in recent months.

Builder confidence likely to continue falling as mortgage rates at 7%, while average rates on existing loans around 3-4%.

On the buyer side, nearly 60,000 purchase contracts canceled in August, equivalent to 15.7% of contracts that month - highest rate since October 2022.

US public debt rises above 33 trillion USD for the first time

According to latest Treasury data, total US debt surpasses 33 trillion USD, up 56 billion USD in one day and up 1 trillion USD in just the past 3 months.

Federal interest costs reach 1 trillion USD, surpassing US defense spending - and even every other spending category.

CBO estimates show US public debt will reach 50 trillion USD by 2030. The figure is increasing by an average of 1 trillion USD EVERY MONTH since the "debt ceiling crisis".

Under new bill, debt ceiling in effect is UNLIMITED until January 2025. At current pace, we could see 50 trillion USD in just a few years.

Other news:

• Instacart (CART) IPOs at $30/share.

• BlackRock Investment Institute downgrades China stocks to neutral due to concerns over the country's real estate sector and limited boost from stimulus measures.

• Canada August CPI up 4.0% y/y (higher than expected 3.8%). Canadian government bond yields rise after higher-than-expected August inflation data.

  

• Brent crude oil price surpasses $95/barrel for the first time in nearly a year.