At the same time a small cut in Portuguese interest rates suggested to some analysts that an earlier- than-expected reduction in key German rates may soon unleash much larger reductions in other Continental rates and help to ease the European recession.
The US Commerce Department said that housing starts rose by 2.8 per cent in September, the third monthly rise in succession, a clear sign that the housing market is responding to the descent in mortgage rates to their lowest levels in almost 25 years. The increase, which followed a rise in July and a jump of 6.7 per cent in August, was due largely to a surge in demand for new apartments.
The latest upturn in housing starts, often regarded as a barometer of activity in the whole economy when measured over several months, coincides with tumbling yields on US bonds, to which mortgages are traditionally linked.
Yields on the benchmark 30-year bond reached their lowest level since 1977 last Friday, when they touched 5.79 per cent. Since then they have edged slightly higher to 5.87 per cent. Yields on 10-year notes have sunk to 5.17 per cent, the lowest since July 1967.
The figures followed a survey by the National Association of Homebuilders which reported that 57 per cent of builders polled in October expected higher sales, up sharply from 44 per cent in September.
Permits to build new homes, an indication of future demand, rose by 0.8 per cent last month after soaring by 6.9 per cent in August.Reuse content