ECB Holds Steady

July 29, 2019 Chatham Financial

Prior Week Summary

U.S. equity markets rebounded last week buoyed by better-than-expected corporate earnings results and U.S./China trade optimism. Corporate earnings season continues to roll on, and the results have been largely encouraging. While analysts have long-forecasted declines for second-quarter corporate earnings, roughly three quarters of the companies that have reported thus far have topped analyst profit expectations. Separately, the U.S. economy expanded at a 2.1% pace in the second quarter, topping consensus estimates calling for 1.8% growth.

In Europe, the European Central Bank opted to leave interest rates steady at the conclusion of their two-day policy meeting, but opened the door for a rate cut at the September meeting and hinted at the possibility for the resumption of their bond-buying program. Speaking after the policy meeting, ECB President Mario Draghi left little to the imagination when detailing his view of the Eurozone saying, “At the same time, the outlook is getting worse and worse. And it’s getting worse and worse in manufacturing especially. And it’s getting worse and worse in those countries where manufacturing is very important.” The market is placing just over an 80% chance on the ECB cutting rates at the September meeting. Elsewhere, Boris Johnson has been chosen to succeed Theresa May as Prime Minister. In his first speech as Prime Minister on Wednesday, Boris Johnson pledged to lead the U.K. “out of the EU on October 31, no ifs or buts.”

The Look Forward

Market participants are in for a busy week on both the economic and geopolitical fronts. All eyes will be on Friday’s release of the July non-farm payroll report. Updated figures on consumer spending, ISM Manufacturing, construction spending and factory orders also dot the economic calendar. The FOMC will hold its policy meeting this week with markets widely expecting a 25 basis point rate cut. U.S. and Chinese officials meet face-to-face in Shanghai for the first time since talks broke down in May.

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. All rights reserved. 19-0195

Previous Article
Trump Levies More Tariffs
Trump Levies More Tariffs

U.S. equity markets suffered one of the worst weeks of losses since the December selloff on the back of Jer...

Next Article
Second-Quarter Earnings Season Begins
Second-Quarter Earnings Season Begins

A shaky start to second-quarter corporate earnings and mixed economic data sent U.S. equity markets lower l...


Subscribe to Chatham's Weekly Market Insights

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