Key Rate Indices

The yield on the 10-year Treasury note surged past 4.6% following the release of March inflation data that exceeded market expectations. This development further reinforces the probability that the Federal Reserve will maintain elevated interest rates for an extended period.

The 10-year Treasury yield experienced a significant increase, rising by more than 18 basis points to reach 4.645%. Concurrently, the yield on the 2-year Treasury note also saw a notable uptick, climbing over 20 basis points to settle at 4.938%.

State of the Market

Below is a summary of some of the most important recent economic releases:


  • Consumer-price index up 0.4% from February vs. an expected 0.3%.
  • Core CPI, which removes the volatile food and energy categories, up 0.4% from February vs. an expected 0.3%.
  • CPI up 3.5% from March 2023 vs. an expected 3.4%.
  • Core CPI up 3.8% from March 2023 vs. an expected 3.7%.

Discussed more in-depth later in the newsletter.

Retail Sales: Despite the ongoing economic difficulties and persistent inflation, American consumers demonstrated their resilience by increasing their spending in March at a rate that surpassed economists’ predictions. According to data released by the Commerce Department on Monday, retail sales in March grew by 0.7%, nearly twice the anticipated rate, following a 0.9% increase in February.

Producer Price Index and Construction Costs: According to an analysis by the Associated Builders and Contractors of the Producer Price Index data released by the U.S. Bureau of Labor Statistics on Thursday, the prices of construction inputs rose by 0.4% in March compared to the prior month. The prices of inputs for nonresidential construction also saw a 0.4% increase during the same period.

A Massive Q1 for Apartment Deliveries in City of Seattle

Q1 2024 witnessed an unprecedented surge in apartment completions, with a staggering 4,260 units delivered to the market. This figure is remarkably high when compared to the total number of units completed in previous years.

To put this into perspective:

  • The Q1 2024 deliveries are nearly identical to the total number of units delivered in the entire year of 2020 (4,286).
  • It represents a whopping 89% of the total units delivered in 2021 (4,774 units).
  • The Q1 2024 figure is equivalent to more than half of the total units delivered in both 2022 and 2023, at 55% (7,689 units) and 56% (7,620 units), respectively.

This exceptional spike in apartment completions can be traced back to the significant increase in building permit applications in late 2020, as illustrated in the graph below. As these approved projects reach completion, we are now observing the culmination of those efforts.

While substantial deliveries are expected to continue in the near future, they are unlikely to maintain nearly the same magnitude. As shown in the above graph, the number of building permits issued in 2020 alone was 2% higher than the combined total of the following three years, showcasing the immense impact of the 2020 permit surge on the current apartment market.

Unexpectedly Hot CPI Inflation

The year-over-year Core CPI rate came in at 3.8%, 10 basis points higher than consensus expectations, and the reverberations are still being felt in the markets.

Some thoughts from this data release:

1. The shelter component, which accounts for over 30% of the CPI, rose 5.6% YoY in March, a decrease from the 5.8% recorded in February. This downward trend aligns with the stagnant rental data we have been seeing.

2. Excluding the lagged shelter measure, Core CPI stood at 2.4% YoY, a 20 BPS increase from the 2.2% reported in February. This indicates that inflationary pressures continue to persist in other sectors of the economy, despite the deceleration in housing costs.

3. The rent and shelter data are taking longer than initially expected to significantly impact the overall CPI. However, it is inevitable that the sustained downward trend in shelter costs will eventually be reflected in the overall CPI, providing a clearer picture of inflation.

4. This hotter than expected data will likely push out the timeline for the Fed’s rate cuts. Before the CPI release, 56% of investors expected an interest rate cut in June. Now, it stands at just 16.5%.

“Today’s crucial CPI print has likely sealed the fate for the June [Fed] meeting with a cut now very unlikely,” said Seema Shah, chief global strategist at Principal Asset Management. “Even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making [Source].”