Economic and Fixed Income Insights – May 16, 2018

Economic and Fixed Income Insights

Housing disappointed in April as starts dropped 3.7%, driven by an 11.3% decline in multifamily units, and permits fell 1.8%.  Residential construction activity has been lackluster in recent months as builders are grappling with the rising costs of materials and labor.  Rising rates are expected to further inhibit residential construction over the near term.  In contrast with housing, retail sales and industrial output both picked up in April, setting second quarter GDP on a path to 3% growth.  In the bond market, yields continue to rise on expectations of further Fed tightening.  The benchmark 10-year US note finished 9 basis points higher for the week to yield 3.07%, and the 30-year bond stands at 3.20%.  Tax-exempt yields trended higher with Treasuries. The 10-year MMD climbed 8 basis points to yield 2.51% and the 30-year MMD finished the week 6 basis points higher to yield 3.03%.

Interest Rate Observations

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of May 15, 2018.

Important Disclosures

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