Market Insights – April 23, 2018

April 23, 2018 Chatham Financial

Positive Data and Deluge of Treasury Supply Brings 10-Year Close to 3%

View this week's rates.

Prior Week Summary

It was a positive week for economic data led by strong retail sales, an increase in industrial production and a rebound in housing starts. The Commerce Department reported that retail sales advanced 0.6% in March, following a 0.1% decline in February. The report detailed that a majority of the 13 retail categories increased on a month-over-month basis, as sales of healthcare related items increased 1.4%, and auto sales gained 2.0% with notable strength in the cars and light truck categories.

In a separate report, factory output was reported to rise 0.1% in March following an upwardly revised 1.5% gain in February. The gain appears to be largely attributable to increases in utilities output and mining output. The increase in manufacturing output rose just 0.1% in March, following February’s outsized gain. Lastly, housing starts increased 2.5% in March after falling 3.3% in February. Multi-family housing starts gained an impressive 14.4%, while traditional single-family units fell 3.7%. The Midwest saw the largest increases in single-family housing starts, which grew at a stunning 37.7% for the month.

The strength of the economic data has brought the benchmark 10-year Treasury note yield ever closer to the psychologically important 3% barrier. As of this writing, the market is only 2 basis points away from 3%, the highest level for the 10-year note yield in the last five years.

The Look Forward

This week, the market will likely be looking forward to the first look at first quarter GDP on Friday, which economists currently expect to increase 2%. There is also a deluge of Treasury supply expected this week, with $32B in 2-year notes, $17B in 2-year Floating Rate notes, $35B in 5-year notes and $29B in 7-year notes on the way.


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.


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
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.


Previous Article
Market Insights – April 30, 2018
Market Insights – April 30, 2018

Fixed income markets spent a good portion of last week pondering the implications of a 3% 10-year Treasury ...

Next Article
Market Insights – April 16, 2018
Market Insights – April 16, 2018

The economic news of the week was centered around the inflation landscape, with updates on consumer prices,...


Subscribe to Chatham's Weekly Market Insights

First Name
Last Name
Company Name
Thank you!
Error - something went wrong!