A bond selloff this morning has been catalyzed largely by a large “beat” in the US Housing Starts numbers for January. On an annualized basis, Housing Starts of 596k were much higher than the 539k that was expected, representing MoM growth of 14.6%. The upside was due to the multifamily segment, which is quite volatile by its nature. [I have included a chart which puts this uptick in perspective relative to the past]

Other US releases indicated that Producer Prices as measure in the PPI are rising faster than expected, +0.5% MoM (vs. exp +0.2%) when excluding Food and Energy.

Both of the above would tend to lead rates higher, while some balance is provided by weak Industrial Production (-0.1% vs. +0.5% expected) and Capacity Utilization (76.1% vs. 76.3% expected) numbers.

Canadian economic data was limited to Leading Indicators (Jan) and Manufacturing Sales (Dec), both of which fell short of expectations.

In spite of the mixed nature of the data, the housing starts number seems to be stealing the show this morning.

Lots of Tier I data is out over the next two days, including US CPI (Thu) and Canadian CPI (Fri).

The bond market has sold off a bit this morning, in large part due to some better than expected US economic data. These include:

-          Initial Jobless Claims for last week were 404k (420k expected)

-          Continuing Jobless Claims for last week were 3.861MM (3.985MM expected)

-          Existing Home Sales increased 12.3% MoM in December (+4.1% expected)

-          Leading Indicators in December were +1.0% (+0.6% expected)

-          Philly Fed for January is 19.3 (20.8 expected)

The most important of these without a doubt is the existing home sales reading, which undoubtedly has a large foreclosure and short sale component.

In Canada, the Leading Indicators reading for December and Wholesale Sales growth for November were both stronger than expected.