Home builder sentiment/ECB purchases

The Aug NAHB home builder sentiment survey was as expected at 15 and flat with July. The Present situation rose 1 pt while Future expectations fell 2 pts. Prospective Buyers Traffic rose 1 pt to 13. Figures in the teens compares with the breakeven of 50 between expansion and contraction so bounce along the bottom remains the theme. For builders, not only do they have to battle a sluggish labor market, tight lending standards and a shift towards renting but the foreclosure overhang still remains large even though States and banks have slowed down the process.

Separately, the ECB announced that they bought 22b euros of peripheral bonds. They don’t give an exact breakdown but we can assume Italian and Spanish debt made up most, if not all of it. This was above expectations of 15b euros and the euro did rise to the highs of the day and to a 3 week high in response as the ECB seems intent on making a difference in the eyes of the market, even though their purchases still pale in comparison to the size of the Italian and Spanish bond markets. What sets the ECB apart from the Fed will be a sterilization effort of soaking up the almost 100b of euros that the ECB spent since May in a 7 day time deposit tomorrow. The Fed of course has sterilized nothing.

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