Market Insights – April 16, 2018

April 16, 2018 Chatham Financial

Inflation Firms

View this week's rates.

Prior Week Summary

The economic news of the week was centered around the inflation landscape, with updates on consumer prices, producer prices and import costs. To start the week, the Labor Department reported that the producer price index rose 0.3% in March, after gaining 0.2% in February. Excluding the more volatile components of food and energy, prices also rose 0.3% in March, bringing the year-over-year increase to 2.7%. There were notable gains in the cost of computer hardware (5.2%), building materials (5.4%) and major household appliances (5.5%).

In a separate release, the Labor Department reported that consumer prices fell 0.1% in March, bringing the year-over-year gain to 2.4%, which was in-line with economist estimates. A substantial portion of the year-over-year increase in consumer prices was attributable to a quirk last year in the price for mobile phones. The report highlighted a 0.3% increase in housing costs, which contributes nearly 42% to the overall CPI basket, and a 0.4% increase in the cost of medical care. Overall, the strength in consumer prices seems to continue to point to a continuation of the Fed’s tightening plan.

The Look Forward

This week the market is expecting updated information on retail sales, housing starts and industrial production. There is also a full slate of Fed speakers this week, including speeches on the economic outlook by Raphael Bostic, John Williams and Charles Evans.

 

Rates Snapshot

Sources: Bloomberg Finance L.P., (Treasuries) Chatham Financial (Swap Curves), FHLB Boston, Chicago, Dallas, Des Moines for FHLB Advance Rates. Wells Fargo Brokered CD Indications.

 

Market Implied Policy Path (Overnight Indexed Swap Rates)

Source: Chatham Financial

 

Fixed Income Snapshot

Source: Bloomberg Finance L.P.

 

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