Prior Week Summary
Capping an end to one of the best quarters in recent memory, U.S. equity markets marched higher last week as investors reacted to U.S.-China trade negotiation developments and dovish sentiment offered by Federal Reserve officials. Members of the U.K. Parliament rejected Prime Minister Theresa May’s Brexit proposal for a third time, increasing the likelihood of a “no-deal” Brexit as the April 12th deadline draws near. Parliament is expected to vote on a number of alternative Brexit proposals on Monday. Separately, Federal Reserve Bank of New York President John Williams reiterated a patient approach to monetary policy, but dismissed ideas that the U.S. is headed for a recession saying, “So, I still see the probability of a recession this year or next year as being not elevated relative to any year.”
U.S. and Chinese officials met in Beijing last week as the two sides worked to find common ground on the oft-reported sticking points regarding intellectual property treatment and a policy enforcement mechanism. Emphasizing that Washington feels no pressure to quickly strike a deal, the Director of the United States National Economic Council, Larry Kudlow said “This is not time-dependent. This is policy- and enforcement-dependent.”
Economic news was largely negative for the week as new releases on housing starts and consumer spending fell below analyst estimates. Fourth quarter GDP was revised down 0.4% to a 2.2% annualized pace, bringing the 2018 GDP growth rate to 3%. In other market news, SOFR was relatively well behaved at quarter-end, when compared to the dislocations that took place at the turn of the year. The SOFR volume weighted median for March 29th was reported to be 2.65% on roughly $900 billion in volume, a 22 basis point increase in rate from the day prior.
The Look Forward
Market participants will be looking forward to updated figures on retail sales, construction spending, the ISM manufacturing index and the March jobs report. U.S. and Chinese trade officials meet in Washington this week to continue trade negotiations.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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