Market Insights - February 25, 2019

February 25, 2019 Chatham Financial

Trade Progress

View this week's rates.

Prior Week Summary

Despite disappointing economic data and fears of a global slowdown, U.S. equity markets continued to march higher, extending the rally that has propelled markets upward since the turn of the year. While U.S. economic data was largely negative last week with updated figures on the manufacturing sector, durable goods orders, and existing home sales all falling below consensus estimates, dovish sentiment from the Federal Reserve coupled with perceived progress in U.S.-Chinese trade negotiations proved enough to lead markets higher.

Minutes from the Federal Reserve’s January meeting indicated that Fed officials expect to halt the reduction of the Fed’s balance sheet later this year, noting that officials found it necessary to “announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year.” The Fed Minutes also revealed that the Federal Reserve continues to have a slight bias toward raising rates with a number officials sharing sentiment that “if the economy evolved as they expected, they would view it as appropriate to raise the target range for the federal funds rate later this year.”

U.S.-China trade negotiations continued in Washington last week as top officials worked to hammer out a preliminary agreement that would help set the stage for a Trump-Xi summit. The timeline for the completion of a deal and an end to the trade war remains unclear, but on Sunday evening, President Trump, citing “substantial progress” in the trade negotiations, indicated that he would extend the trade-truce beyond March 1st.

The Look Forward

As we enter the final week of February, market participants will be looking forward to updated figures on housing starts, consumer spending, and fourth-quarter GDP. Additionally, a host of U.S. Treasury auctions are taking place, ranging from 3-month Treasury Bills to 7-year Treasury Notes.

 

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. 19-0062

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