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).

Generally weak data was released in North America this morning. For Canada, Manufacturing Sales growth of -0.8% in November fell well short of the +0.3% reading the market had been expecting. The slide was caused entirely by a decrease in the motor vehicles / parts segment.

For the US, Housing Starts for December at 529k annualized were also weak, but there was a strong pickup in building permits, and some weak results released by some US financial institutions this morning are also weighing on the market.

Balancing off these generally disappointing items are strong earnings results in the tech sector and decent results in the latest auction of Portuguese debt.

The big data for the morning are the Canadian CPI numbers for August, and the short story is that the inflationary pressures experienced at the start of the year seem to be subsiding. The CPI for August was +1.7% YoY (+1.9% was expected; +1.8% was the July reading), while Core Inflation YoY was a stable 1.6% which was in line with expectations. On balance, tame inflation reduces pressure to raise rates further.

South of the border, Housing Starts were better than expected in August: 598k vs. 550k expected. The FOMC rate decision will be announced at 2:15pm, and while nobody expected the FOMC to raise rates, as always there will be considerable attention given to the language of the accompanying statement for clues on future hikes, or possibly additional quantitative easing programs.