Market Insights - March 4, 2019

March 4, 2019 Chatham Financial

Conflicting Signals

View this week's rates.

Prior Week Summary

After a busy week on both the economic and geopolitical front, U.S. equity markets edged higher, including the S&P 500 index, which closed above the psychologically-significant 2,800 price level for the first time since early November of last year.

The Director of the United States National Economic Council, Larry Kudlow, indicated that the U.S. and China are nearing the completion of a “historic” trade deal, citing a number of Chinese concessions, including a reduction of subsidies to state-owned institutions. A finalized deal is still likely weeks away, as the deal needs approval from high-level officials on both sides. But the U.S. Trade Representative’s office announced Thursday that tariff increases will be put on hold indefinitely because of the progress in trade negotiations.

Speaking in front of Congress, Federal Reserve Chairman Jerome Powell acknowledged that “crosscurrents and conflicting signals” have muddied the outlook for the U.S. economy and emphasized the Federal Reserve’s data dependency saying, “Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve.”

In economic news, the U.S. economy grew at a 2.6% annualized pace in the 4th quarter, topping analyst estimates as GDP grew 3.1% year-over-year, the highest yearly growth rate since 2005. Updated figures on housing starts, the ISM Manufacturing Index and consumer spending fell below consensus estimates.

The Look Forward

A host of market-moving economic data will be released this week, most notably the January jobs report on Friday. Additionally, $48 billion of 3-month Treasury Bills and $39 billion of 6-month Treasury Bills 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. 19-0067

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