Back to Work, For Now
Prior Week Summary
President Donald Trump and members of Congress agreed to reopen the government on Friday, ending at least temporarily, the longest government shutdown in U.S. history. Uncertainty around funding for a southern border wall remains, but the stopgap spending bill will fund the government for the next three weeks while negotiations continue. News of an end to the shutdown, as well as a host of the largest U.S. companies reporting positive fourth-quarter earnings, sent equity markets higher last week. However, a number of the headwinds that have plagued investor sentiment since the turn of the year persist, namely the U.S.-China trade war, Brexit uncertainty and fears of a slowing global economy.
In other market news, ICE rolled out a preliminary proposal for a new market-based index that shares many of the same characteristics as LIBOR. The new index, the U.S. Dollar ICE Bank Yield Index, is a measure of the average cost of funds for large international banks borrowing U.S. dollars for 1, 3 and 6-month tenors on an unsecured basis.
The Look Forward
All eyes will be on the negotiations between the U.S. and Chinese officials in Washington next week, as the two countries attempt to reach an agreement that would end the ongoing trade war. Additionally, the FOMC votes on the upper bound of the Federal Funds Target Range on Wednesday but is widely expected to hold the rate steady at 2.50%.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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