Bond Market Update

Data Recon

• Total housing starts increased 6.2% month-over-month in December to a seasonally adjusted annual rate of 1.404 million units (Briefing.com consensus: 1320K), with single-unit starts up 4.1%. Building permits increased 4.3% to a seasonally adjusted annual rate of 1.448 million (Briefing.com consensus: 1412K), with single-unit permits down 1.7%.
  • The key takeaway from the report is that it is not the answer for a supply-constrained housing market. Single-unit permits were down overall, but they fell the sharpest in the South (-5.3%), which is the nation's largest homebuilding region.
• Durable goods orders declined 1.4% month-over-month in December (Briefing.com consensus: -2.6%), paced by a 5.3% decline in transportation equipment orders. Excluding transportation, durable goods orders rose 0.9% month-over-month (Briefing.com consensus: 0.3%) following a 0.4% increase in November.
  • The key takeaway from the report is that the weakness was concentrated in the transportation component. Otherwise, it was a solid report featuring a 0.6% increase in nondefense capital goods orders, excluding aircraft, which is a key gauge of business spending.
• Yield Check:
  • 2-yr: +2 bps to 3.46%
  • 3-yr: +2 bps to 3.49%
  • 5-yr: +3 bps to 3.65%
  • 10-yr: +3 bps to 4.08%
  • 30-yr: +2 bps to 4.70%