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Treasuries Move Back To The Upside On Disappointing Housing Data

Following the pullback seen in the previous session, treasuries showed a notable move back to the upside during trading on Wednesday.

Bond prices moved steadily higher over the course of the session before closing firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.1 basis points to 2.061 percent.

The strength among treasuries came after the Commerce Department released a report showing a bigger than expected drop in housing starts as well as a nosedive in building permits.

The Commerce Department said housing starts slid by 0.9 percent to an annual rate of 1.253 million in June after slipping by 0.4 percent to a revised rate of 1.265 million in May.

Economists had expected housing starts to fall by 0.6 percent to a rate of 1.261 million from the 1.269 million originally reported for the previous month.

The report also unexpectedly showed a substantial pullback in building permits, an indicator of future housing demand.

Building permits plunged by 6.1 percent to an annual rate of 1.220 million in June after climbing by 0.7 percent to a revised rate of 1.299 million in May.

Economists had expected building permits to rise by 0.5 percent to a rate of 1.300 million from the 1.294 million originally reported for the previous month.

With the much steeper than expected drop, building permits fell to their lowest level since hitting a rate of 1.201 million in May of 2017.

Treasuries saw continued strength following the release of the Federal Reserve's Beige Book, which said economic activity continued to expand at a modest pace overall from mid-May through early July.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, noted the assessment of the economy was little changed from the prior reporting period.

The Fed referenced widespread concerns about the possible negative impact of trade-related uncertainty but said the economic outlook was generally positive for the coming months, with expectations of continued modest growth.

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims, Philadelphia-area manufacturing activity, and leading economic indicators.

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