There is no doubt that the US economic recovery cannot be sustained without an improving outlook for the US housing market

There is no doubt that the US economic recovery cannot be sustained without an improving outlook for the US housing market. This is where last night's data comes as welcome news, but it may also concern the US Fed. The recent decline in US Treasury yields (and by association mortgage rates) are helping breathe new life into the US housing sector and this is likely to limited the downside risks to Treasury yields, but it also highlights how sensitive the housing market is to the price of credit. When yields rose to 3% in January housing activity growth dissipated and it will be very hard for the US Fed to keep Treasury yields below this level during a tightening cycle. The good news in that housing is improving, the labour market is strong and inflation remains contained. Our overnight report is available here: (VIEW LINK)