Rising 10-Year U.S. Treasury yields have financials leading the charge today.  The 10-year yield has risen 11 basis points since Thursday, and it is now yielding 2.95%.  Financials are strong across the board with the KBW Bank Index, BKX, higher by 1.60%.  There are several theories on why rates have risen so quickly.  One is that President Trump’s tweet about how he was unhappy with the Fed raising rates may slow the Fed down.  This in turn will lead to higher inflation and higher bond yields.  Another theory is it could be China flexing its muscles and selling some of their treasury holdings in retaliation for trade tariffs.  A more plausible theory is related to rising yields in Japan following reports that the Bank of Japan (BOJ) was adjusting its monetary policy. 

China is the largest foreign owner of U.S. Treasurys.  As of May 2018, China held $1.18 trillion, which is 19% of all Treasury bills, notes and bonds held by foreign countries.  Japan is the second largest foreign holder with $1.03 trillion in Treasury holdings.   

Existing Home Sales   

Existing home sales declined 0.6% to 5.38 million units in June month over month.  This was below consensus of 5.45 million.  Sales have declined four months in a row and were 2.2% lower than a year ago.  The median existing single-family home price rose 5.2% to $279,300 year over year. 

Median home price increases by region:

• Northeast increased 3.3% to $305,900
• Midwest increased 3.5% to $218,800
• South increased 2.7% to $237,500
• West increased 10.2% to $417,400

Existing home sales by region:

• Northeast +5.9%
• Midwest +0.8%
• South -2.2%
• West -2.6%

Inventory rose by 1.95 million, an increase of 4.3%.  This increased the unsold inventory supply to 4.3 months from 4.1 months in May.  Inventory was up 0.5% from a year ago, which is the first increase since June 2015.  The average number of days on the market declined to 26 from 28 a year ago.  Limited supply and rising prices is weighing on overall sales.  Affordability becomes an issue when home prices are rising faster than incomes. 

Equity indexes are slightly positive on the day.  The Russell 2000 has the lead, higher by 0.37%.  Transportation stocks and financials are strong, while utilities and consumer staples are laggard.