US new home sales rose to 682,000 in March, measured month on month.
This was above the forecast of 668,000.
Stronger Housing Data Signals Caution
The March new home sales figure, coming in stronger than expected at 682,000, suggests the economy has more momentum than many anticipated. This resilient consumer demand points to underlying strength that will likely keep the Federal Reserve cautious. We believe this reduces the probability of any interest rate cuts in the summer.
Recent data supports this cautious stance, as the latest April Consumer Price Index showed inflation remains persistent at 3.6%, above consensus. Paired with a solid jobs report last week that added 215,000 payrolls, the case for the Fed to hold rates steady is now much stronger. This is a significant shift from the market’s dovish expectations we saw at the end of 2025.
For the coming weeks, we see opportunity in derivatives that bet against imminent rate cuts. Traders should consider selling September SOFR futures or buying put options on Treasury bond ETFs like TLT, as yields may drift higher. This strategy positions for a scenario where the market reprices its rate cut expectations further out into the future.
This economic resilience reminds us of the environment in 2023, when strong data repeatedly pushed back against calls for a Fed pivot. We are now watching for signs of increased volatility in the interest rate markets. Buying VIX call options could serve as a cheap hedge against a market surprise if the Fed signals a more hawkish tone in its next meeting.
