Market Insights - February 4, 2019

February 4, 2019 Chatham Financial

Fed Takes a Softer Tone

View this week's rates.

Prior Week Summary

After a shaky start to the week, U.S. equity markets moved higher, capping an end to the best month for global equities in over seven years. A host of economic and geopolitical events drew the attention of market participants this week, none more so than the change in stance by the Federal Reserve. While the FOMC was widely expected to hold rates steady this week, the Federal Reserve signaled a more dovish path to monetary policy, hailing a “wait and see” approach to interest rate changes and indicating that the Fed is “prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.” The change in tone comes only 6 weeks after the Federal Reserve forecasted two interest rate hikes in 2019, largely due to “conflicting signals about the outlook.”

In economic news, the U.S. economy added 304,000 jobs in January, far surpassing the consensus estimate of 165,000 jobs. The Conference Board Consumer Confidence index fell, but updated readings on new home sales, manufacturing and construction spending beat analyst estimates.

The Look Forward

In a light week for economic data, in addition to the State of the Union, market participants will be awaiting updated weekly figures for durable goods orders, the trade balance and initial jobless claims. Additionally, $45 billion of 3-month Treasury Bills, $39 billion of 6-month Treasury Bills, $38 billion of 3-year Treasury Notes and $27 billion of 10-year Treasury Notes will be going to auction.

 

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. 19-0049

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