Prior Week Summary
It was an interesting week for the markets which featured the first data points on the new Secured Overnight Financing Rate (SOFR), an underwhelming non-farm payrolls report, as well as somewhat disjointed rhetoric from the administration on our trade posture with the second largest global economy.
In its inaugural week of publication by the New York Federal Reserve, the SOFR rate traded with a range of 9 basis points, as market participants figured out how to price the new rate. It was interesting to note how the range of daily values began to converge toward its median as the week went on. For example, on its first day of publication, there was a 1% difference between the highest and lowest rate reported by the New York Fed for that day’s transactions. By Friday, that range had narrowed to only 19 basis points. The transactions underpinning the new rate were reported to be approximately $840 billion per day. The next benchmark in the roll-out of SOFR related market instruments will be the launch of exchanged traded futures, expected to begin on May 7th.
In economic news, the Labor Department reported that payrolls rose by 103,000 in March, following a revised 326,000 gain in February. The gain in payrolls was well below the median forecast for a gain of 185,000 that was expected prior to the release. The jobless rate stayed steady at 4.1% for the sixth straight month, while hourly earnings increased to 2.7% on a year-over-year basis.
The Look Forward
There is a lot on tap in the way of economic releases this week, beginning with PPI on Tuesday, CPI on Wednesday, as well the release of the March FOMC meeting minutes. There are also a number of Fed events, including Boston President Rosengren speaking on the economic outlook.
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
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