Market Insights - March 11, 2019

March 11, 2019 Chatham Financial

When Doves Fly

View this week's rates.

Prior Week Summary

After several weeks of gains, U.S. equity markets moved broadly lower last week, primarily driven by global growth concerns, a weak jobs report and a policy reversal from the ECB. The jobs report fell far below consensus estimates, as the U.S. economy added a meager 20,000 jobs in February. The jobs data offered a few bright spots, however, as the unemployment rate edged down to 3.8%, and average hourly earnings advanced 3.4% year-over-year. In other economic news, new home sales and housing starts topped analyst estimates, but updated figures on construction spending and the trade balance fell below consensus estimates.

In a shift of policy, the ECB announced plans to aid a slowing European economy via a new stimulus package saying, "A new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021, each with a maturity of two years.” Additionally, the ECB signaled that interest rates are on hold through the rest of the year, months longer than originally anticipated. The policy reversal comes only one day after the Organization for Economic Cooperation and Development cut 2019 growth forecasts for the Eurozone to 1%, down from a previous estimate of 1.8%.

The Look Forward

In a busy week for economic releases, market participants will be looking forward to updated figures on CPI, PPI, retail sales and the Empire Manufacturing Survey, among others. Additionally, $38 billion of 3-year Treasury Notes, $24 billion of 10-year Treasury Notes and $16 billion of 30-year Treasury Bonds are 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. 19-0077

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