Market Insights - December 17, 2018

December 17, 2018 Chatham Financial

Last Fed Meeting of the Year

View this week's rates.

Prior Week Summary

The recent bout of market volatility seems to be accelerating into year-end as concerns over economic growth prospects and geopolitical risks take center stage. Equity prices, as measured by the S&P 500, fell an additional 1.5% last week. The risk-off sentiment brought the 10-year Treasury note yield to trade as low as 2.82% mid-week, prior to ending the week at 2.87%. In economic news, the last reading of the consumer price index before the holiday season was unchanged in November, which brought the year-over-year change in core CPI to 2.2%. The report suggests that the underlying inflation rate is relatively consistent with the Fed’s 2% objective, which aligns well with the market’s anticipation for a 25 basis point rate hike at the December FOMC meeting.

As of this writing, markets are pricing in a nearly 75% chance of a 25 basis point hike on Wednesday. Given the relatively public criticism the Fed has taken from the administration, many in the market are expecting a “dovish hike”. Accordingly, the market will likely be focused on the press conference and the dot plot for clues as to current thinking of the FOMC and any changes to the forward guidance.

The Look Forward

This publication will be taking a brief sabbatical into year-end and will continue after the New Year.

 

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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