Morning stuff

Aug Housing Starts totaled 598k annualized, almost 50k higher than expected and up from a revised 541k last month (from 546k). Permits totaled 569k and were 9k above estimates. Most of the gain in Starts was led by multi family as they rose 32% m/o/m while single family starts rose by a more modest 4.3%. Multi family also drove the m/o/m rise in permits as single family permits fell to the lowest since Apr ’09. Thus, while the S&P’s bounced on the data, single family permits dropping to 16 month lows is a not a precursor to a pick up in building of new homes. With a still large overhang of existing homes for sale and in foreclosure, that is a good thing from an inventory perspective. With home ownership rates in a secular decline however, the rise in multi family building will likely be a long term trend.

Ireland sold 4 yr and 8 yr paper with solid demand but at yields up substantially over the past few months. The 4 yr deal priced with a yield of 4.77%, up 114 bps from the one sold a month ago. The 8 yr auction yielded 6.02% and above the 5% rate the EU/IMF is offering debt at. The successful auction sent the 10 yr Irish spread to German bunds down to 382 bps from its high of 402 bps yesterday. Spain also sold 12 and 18 mo bills with good demand and yields in line with those sold last month as Spain has separated itself for now from P, I and G. The Fed of course meets today and we’ll be watching for clues to their intent with trying to lower interest rates even more in addition to their view on the economy. Gold is up $80+ from the last meeting and is the ultimate arbiter of central bank policy. Without sound money, no healthy recovery can be had.

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