Hello, How Low?

March 25, 2019 Chatham Financial

Prior Week Summary

Despite dovish sentiment from the Federal Reserve, U.S. equities moved lower last week as global growth fears intensified amid weak manufacturing data from Germany and the U.S. The FOMC held interest rates steady at the conclusion of their two-day policy meeting and indicated that rate hikes are on hold for the rest of the year as the central bank shifted forecasts for future rate hikes and economic growth lower. Speaking at the press conference following the FOMC’s decision, Federal Reserve Chairman Jerome Powell said, “We don’t see data coming in that suggest that we should move in either direction. They suggest that we should remain patient and let the situation clarify itself over time.” As we head to print, market participants are pricing in a rate cut at the December FOMC policy meeting.

European Union leaders voted to give the United Kingdom an unconditional, two-week extension to their departure from the E.U., averting a “no-deal” Brexit scenario at the end of this month. U.K. lawmakers are expected to vote early this week on Prime Minister May’s newest proposal with a Brexit deadline now scheduled for April 12th. Separately, Robert Mueller’s investigation into Russian interference in the 2016 presidential election concluded that “The investigation did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities.”

The Look Forward

Market participants are looking forward to updated figures on housing starts, new home sales and consumer spending among others. The U.S. and China are scheduled to resume trade talks in Beijing this week.

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.

 


Disclosures

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit https://www.chathamfinancial.com/legal-notices/.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved. 19-0085

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