U.S. Treasuries higher start with shorter tenors expected to show slight relative strength in the early going. Treasury futures accelerating their advance as the market received cooler than expected June inflation figures from the U.K., which have reduced expectations for a 50-bps rate hike to what is now essentially a toss-up.
Earlier in the night, Bank of Japan Governor Ueda said that the 2.0% inflation target remains “some distance away,” helping the dollar bounce against the yen.
Crude oil holds a modest gain, hovering just below its 200-day moving average (77.26), while the U.S. Dollar Index is up 0.3% at 100.28.
Higher financing costs are creating headwinds for builders and preventing activity
Total housing starts declined 8.0% month-over-month to a seasonally adjusted annual rate of 1.434 million (consensus 1.475 million), with single-family starts down in all regions except the West (+4.6%), following a downwardly revised 1.559 million (from 1.631 million) for May.
Building permits decreased 3.7% month-over-month to a seasonally adjusted annual rate of 1.440 million (Briefing.com consensus 1.472 million), with permits for single-family units flat to positive in all regions, following an upwardly revised 1.496 million (from 1.491 million) for May.
The key takeaway from the report is that higher financing costs are creating headwinds for builders and preventing activity from being stronger in a supply-constrained housing market.
2-yr: -3 bps to 4.73%
3-yr: -4 bps to 4.31%
5-yr: -4 bps to 3.96%
10-yr: -5 bps to 3.74%
30-yr: -2 bps to 3.88%