MRG MEGA BERJANGKA
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US Home Sales Growth Declines in February with Higher Rates

Posted By : MRG Mega Berjangka, Mar 20, 2014 – 21:12

Talking Points:

-US Home Sales (FEB) comes in at 4.60 vs. 4.60M est. and 4.62M prior

-US Home Sales MoM (FEB) comes in at -0.4% vs. -0.4% est. and -5.1% prior

-Leading Index (FEB) comes in at 0.5% vs. 0.2% est. and 0.1% rev. prior

-Philadelphia Fed (MAR) comes in at 9.0 vs. 3.2 est. and -6.3 prior

Home sales data on Thursday came in as expected following the Fed’s decision to taper asset purchases once more at the March FOMC Rate Decision on Wednesday. Other figures released at 14:00GMT included the Leading Index for February and the Phili Fed figure for March. Both came in better than market expectations, although the January Leading Index print was revised lower from 0.3% to 0.1% as a final read.

Price action was generally limited, although European currencies initially saw general weakness against the USDollar. This move comes after heavy USD strength following the Fed yesterday and Yellen’s presser.

At yesterday’s FOMC Rate Decision, the Fed announced it would cut monthly purchases of MBS and Treasuries by $5B each, thus leaving the total monthly pace at $55B. Although Dr. Janet Yellen made it clear that we would not see any hikes in the Fed Funds Rate until 2015 at the earliest, this cannot stop the bond market from pricing in developments in the context of an end to QE3. On the chart below, we can see the vivid impact that the Fed’s taper talk in May- and subsequently higher mortgage rates- had on home sales in the United States. This February data confirms further weakness on the back of higher 30yr mortgage rates in an extremely sensitive housing market.