Treasuries: The Dog That Did Not Bark


Today's March housing starts should cap this week's series of stronger than expected data, beginning with the CPI figures earlier in the week and continuing yesterday with retail sales and the dramatic drop in weekly jobless claims. Industrial production was the one notable exception. We had been concerned that the chip shortage may have adversely impacted auto production in March, but this was the key story. Auto and part production rose by 2.8% in March after falling 10% in February. The unusually cold February saw a 9.2% jump in utility output, while the seasonally-adjust weather was warmer in March, and utility output fell by nearly 11.5%.  

The April data were strong as well. These included the Philadelphia and Empire State Fed surveys were stronger than expected (and at new multi-year highs) though the former had a quirky revision. As the Beige Book suggested, producers are seeing costs rise due to supply bottlenecks and shortages. The sharp (193k) drop in weekly initial jobless claims was sufficient to drag the four-week moving average below 700k since before the pandemic struck. To be sure, there is still a long way to go. Recall weekly jobless claims were hovering a little more than 200k at the start of last year. Encouraged by rising prices, cheap money, and better weather, housing starts are expected to have jumped by 13.4% last month, according to Bloomberg's survey's median forecast. It would put the seasonally adjusted annual rate above 1.6 mln for only the third time since the Great Financial Crisis.  

Canada reports March housing starts (expected to be strong) and its February international transactions. These reports are not typically market movers. Ahead of the Bank of Canada's meeting on April 21, the March CPI will be reported. The Canadian dollar is the worst-performing major currency this week, rising less than 0.2% against the US dollar (~CAD1.2505), which is not unusual in a soft greenback period. The US dollar settled near CAD1.2530 last week. Mexico's calendar is light and remains so until the second half of next week when it reports its bi-weekly reading of CPI, March unemployment, and February retail sales. The peso has gained about 1% against the greenback this week (~MXN19.95) and reached its best level since mid-February. It's a four-day advance under threat now. The US dollar settled near MXN19.94 yesterday.  

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Read more by Marc on his site Marc to Market.

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