Market Insights - January 28, 2019

January 28, 2019 Chatham Financial

Back to Work, For Now

View this week's rates.

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%.

 

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. 19-0043

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