Good Tuesday AM from your hometown lender,

Both building permits and starts were higher than expected this morning.

It doesn’t move the needle for the market though as we are seeing bonds having an up day. The Federal Reserve’s two-day meeting starts today, with an interest rate decision coming Wednesday at 11am. Few are expecting an imminent rate cut, but the meeting will offer clues on when the central bank might make its move. After the recent stubbornly sticky inflation, bets are looking at June for the first hike still with more than three cuts this year. The thing I will be interested to hear tomorrow from the Fed is, if and how much the Fed will back off selling their bond holdings. The Fed has been the biggest seller of bonds which has been the catalyst for wider spreads. If the Fed backs off selling, it will help bonds and rates. Tough to float into any big news event. The Fed is absolutely a big news event.

A couples of snippets from the WSJ this am to share…

Meanwhile, the real estate industry–perhaps the piece of the economy that’s most sensitive to interest rates–is facing the possibility of major changes to its structure after a landmark legal settlement last week. We have a look at what might be in store. But the decision they face isn’t so simple: Surveys show banks are pulling back from consumer lending. Interest rates on credit cards are near record highs and credit-card delinquencies are rising. Policy operates on a lag, and it’s conceivable those trends could gain more steam.

The Bank of Japan raised rates for the first time in 17yrs. Japan was the last central bank to hold onto negative rates and with this move, has moved its key policy rate back to at least zero.

There’s a dangerous dynamic playing out in banking that’s left hundreds of institutions vulnerable, CNBC’s Hugh Son reports. An analysis by consulting firm Klaros Group found more than 280 banks have both high exposure to commercial real estate and sizable unrealized losses resulting from the Federal Reserve’s repeated rate hikes. Those challenges have left banks likely in need of private investment or consolidation. But M&A is hard to pull off right now, which means cracks may soon appear.

Please remain safe and healthy, make today great!