Morning Market Update: May 17, 2019

Strong Housing Starts Data Pushes Yields Higher as Equities Rise

Commentary for Thursday: Treasurys sold off as equities increased. Yields were initially lower in quiet overnight trading and shifted higher throughout the early morning. An increase in housing starts and building permits in April pushed yields higher. They were little changed the remainder of the morning on two Treasury auctions and various Fed speeches. Yields remained muted in the afternoon before ending with the curve flatter.   

This Morning: Treasury yields are trending lower with no economic data releases to direct market activity.

Housing starts increased 5.7% to an annual rate of 1,235K. The increase was supported by multifamily starts increasing 4.7% in the month, while single-family starts rose 6.2%. The Northeast rose 84.6% and the Midwest grew 42.0% while the South declined 5.7% and the West fell 5.5%. Building permits gained 0.6% in April to 1.30 million as an 8.9% rise in multi-family permits offset a 4.2% decline in single-family permits. On an annual basis, starts are down 2.5% and permits are down 5.0%.  

Initial jobless claims decreased by 16K to 212K in the week ending May 11. The previous week was unrevised at 228K. Despite the decrease, the 4-week moving average increased slightly by 4.75K to 225K. Continuing claims decreased by 28K to 1,660K in the week ending May 4. The prior week was revised higher by 4K to 1,688K. Despite the decrease, the 4-week moving average rose slightly by 1.5K to 1,668K. The insured unemployment rate remained unchanged at 1.2%.  

In a speech Thursday, Minneapolis Fed President Kashkari commented, "We should wait, and I'm not in favor of cutting rates either as an insurance cut or because of some recent weakness in some of the data."

Financial Markets Research

The morning market update is provided by: 

solutionsheadshots_hotchkiss_smJames Hotchkiss
Director, Member Strategy and Solutions

SolutionsHeadshots_Deven_smMelissa Deven
Director, Member Strategy and Solutions


The data and valuations provided in this document are for information purposes only and are provided as an accommodation and without charge. The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this document. This document is not intended to constitute legal, investment, or financial advice or the rendering of legal, consulting, or other professional services of any kind.

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