September 22, 2022 Headlines

Treasury yields are leaking 3-5 basis points higher across much of the curve in the wake of yesterday’s FOMC decision and a flurry of rate hikes from other central banks. Regarding the latter, the Bank of Japan would be an exception, deciding to maintain a dovish policy and intervening to support its currency overnight versus the dollar for the first time since 1998 after the exchange rate touched over 145 following the Fed decision. As expected, the FOMC announced a 75 basis point rate hike yesterday, marking 300 bps of hikes in just six months, and the updated dot plot revealed a median participant forecast of 125 bps more hikes this year and another 25 bps in 2023, pushing the projected terminal rate to 4.625%. This would imply another 75 bp hike in November and 50 bp hike in December, or 400 bps of rate hikes in just a 9-month timeframe.

Fed Chair Powell’s tone in the press conference was equally hawkish, although he emphasized that the Fed’s position was unchanged from his Jackson Hole speech and the prior two meetings. Powell and his colleagues remain concerned over an overheated labor market and the consequential risks of persistent inflation above the Fed’s target, and he also highlighted the housing market as an area of the economy where a correction was likely or warranted. The 2-year/10-year Treasury spread has fallen to a new cycle low of -0.53%, the most inverted since April 2000 (-0.56%). The U.S. dollar index has also set a fresh 20-year high.  

Jason Haley
Chief Investment Officer

09/19/22NAHB Housing Market Index474649
09/20/22Housing Starts1450k1575k1446k1404k
09/20/22Building Permits1604k1517k1674k1685k
09/20/22Housing Starts MoM0.30%12.20%-9.60%-10.90%
09/20/22Building Permits MoM-4.80%-10.00%-1.30%-0.60%
09/21/22MBA Mortgage Applications3.80%-1.20%
09/21/22Existing Home Sales4.70m4.80m4.81m4.82m
09/21/22Existing Home Sales MoM-2.30%-0.40%-5.90%-5.70%
09/21/22FOMC Rate Decision (Upper Bound)3.25%3.25%2.50%
09/21/22FOMC Rate Decision (Lower Bound)3.00%3.00%2.25%
09/21/22Interest on Reserve Balances Rate3.15%3.15%2.40%
09/22/22Current Account Balance-$260.0b-$251.1b-$291.4b-$282.5b
09/22/22Initial Jobless Claims217k213k213k208k
09/22/22Continuing Claims1418k1379k1403k1401k
09/22/22Leading Index-0.10%-0.40%
09/22/22Kansas City Fed Manf. Activity53
09/23/22S&P Global US Manufacturing PMI5151.5
09/23/22S&P Global US Services PMI45.543.7
09/23/22S&P Global US Composite PMI46.144.6

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