Improved risk sentiment overnight is driving Treasury yield higher this morning. Trade worries have diminished somewhat, and this morning’s housing data was better than expected. The White House announced yesterday that it would again delay the initiation of new tariffs on European and Japanese auto imports, but President Trump is giving both 180 days to agree to a deal that would “limit or restrict” auto imports to the U.S. or face new tariffs. Also, Trump signed an executive order last night effectively banning Chinese telecom giant Huawei from selling equipment in the U.S., and the Commerce Department will also add Huawei to its list of entities engaged in activities contrary to U.S. interests. The latter could restrict the sale of U.S. technology to the company, including processing chips, which would potentially be a significant blow to Huawei (and perhaps add more pressure on China in current negotiations).

Housing starts rose at a 1.235mm unit annual pace in April (+5.7%), and the March growth rate was revised higher to +1.7% from -0.3%. Building permits, which are a proxy for future activity, were also better than expected in April, rising at a 1.296mm annual pace (March also revised higher). Housing has subtracted from GDP growth for the last 5 quarters, and this report is a step in the right direction to breaking that streak in Q2.

Jason Haley
Managing Director, Investment Management Group