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 Monday, October 25 2021 @ 08:17 am UTC

Weaker Real Estate New Home Sales Got The U.S. Treasury Ready

General NewsWeaker-than-expected new home sales failed to change investor expectations of one or perhaps two more interest rate hikes by mid-year, as the U.S. Treasury debt prices were little changed on Monday.

As it could signal the Federal Reserve may have to consider slowing its campaign of interest rate hikes to allow the economy to grow, normally, a weaker-than-expected housing market would support bonds.

Anthony Chan, chief economist at J.P. Morgan Private Client Services in Columbus, Ohio, said, "Although it's not particularly good news for the housing market, the fact that you're seeing weakness here shows that monetary policy is working and the (Fed) would not have to blunt the economy with more hikes than the market has been anticipating."

Benchmark 10-year notes were 3/32 lower in price with the yield little changed at 4.59 percent, and record high inventories in the January housing report helped take the edge off any bullish trade.

That was below expectations of 1.260 million sales and below an upwardly revised 1.298 million unit pace in December. New home sales fell 5 percent to the slowest pace in a year, with sales of new single-family homes declining to a 1.233 million unit annual pace.

The number of new homes available for sale at the end of January rose to a record 528,000, the largest inventory since November 1996. Still, traders said high inventory levels could be cause for some early concern about the pace of the U.S. housing slowdown and said they will continue to closely watch inventory levels in coming months.

Five-year notes slipped 2/32 to yield 4.66 percent, The 30-year bond fell 6/32 to yield 4.54 percent, while two-year notes were unchanged to yield 4.74 percent.

traders in general are preparing for a busy week in terms of economic data, including fourth-quarter preliminary gross domestic product and January existing home sales on Tuesday, followed by January personal income and consumption data on Wednesday, all that while the new homes data had little impact on the market.

By: Dijon Wainwright

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