Last Week In A Nutshell
Rates ended the week about 10 bps lower following renewed trade tensions with China.
Upcoming Attractions
This is a light week, especially if the shutdown continues.
- CPI report: Originally scheduled for Wednesday, but will be released October 24, regardless of when the government re-opens because the data is used to determine cost of living increases for social security recipients.
- Fed speakers: Fifteen Fed speaking engagements this week, including Chair Powell’s speech at the NABE conference earlier today, where he predicted an end to the Fed’s balance sheet runoff in coming months.
- Postponed if shutdown continues: Retail sales (Thursday), PPI (Thursday), housing starts and permits (Friday), jobless claims (state level data still available).
Last Week’s Highlights
- Trade tensions: In response to new controls on rare earth exports, President Trump said that the US would add an additional 100% tariff on Chinese goods beginning November 1. These moves are ahead of his scheduled meeting with President Xi later this month. Ten-year treasury yields dropped about 10 bps on the news while global equities fell. Markets are worried about economic growth and labor market implications of an increase in tariffs, because inflation has not increased as much as feared after the initial round of tariffs. Markets partially reversed these moves as the tension subsided, but it remains to be seen how this latest escalation will end. It’s possible that tariff rates on China will end up higher after the meeting, but it’s also possible the back and forth will lead to a lower tariff rate.
- FOMC minutes: The minutes from the September Fed meeting suggest that most participants are worried about downside risk to the labor market and would vote for further reductions in the Fed funds rates this year. A majority also worried about inflation risks, but they noted that, net of tariff effects, inflation would be close to the Fed’s target by year end. The market has currently priced in additional cuts at each of the two remaining 2025 meetings.
Diving a Little Deeper
Redfin’s housing market reports:
- Homebuyers Are Canceling Deals at a Record Rate. Here’s Why.
- Roughly 56,000 U.S. home-purchase agreements were canceled in August, equal to 15.1% of homes that went under contract that month—the highest August percentage in records dating back to 2017.
- Buyers frequently back out of deals when they find issues during the inspection, they have trouble selling their existing home or their financing falls through, according to a survey of Redfin agents.
- There Are 72% More Condo Sellers Than Buyers in the U.S.
- Would-be condo buyers are spooked by high costs, including rising HOA dues and insurance fees–but the silver lining is bargaining power. The gap between sellers and buyers has shrunk since springtime, though, when there were 81% more sellers.
