Market Insights – May 21, 2018

May 21, 2018 Chatham Financial

Smooth Sailing

View this week's rates.

Prior Week Summary

Rates continued to rise on the long-end of the curve last week, with the 10-year Treasury note reaching 3.13% intraday on Thursday as incoming economic news was viewed as positive in aggregate. The news of the week kicked off with the Commerce Department reporting a 0.3% increase in retail sales in April, following a positively revised 0.8% gain in March. However, when excluding sales related to the automobiles and fuel sectors, sales also increased 0.3% for the month. Consumer spending is an important component of the GDP calculation, and the retail control group which factors directly into the growth figures was strong, increasing by 0.4% in April.

Separately, the Federal Reserve reported that industrial production increased 0.7% on a month-over-month basis in April, benefitting from rising energy prices. The gains in production were broad-based, with the manufacturing sector gaining 0.5%, mining advancing 1.1%, and utility output rising by 1.9% for the month.

Lastly, the Conference Board reported that the Leading Economic Index (LEI) rose 0.4% in April, benefiting from an expanding workweek, which overwhelmed the negative impact of stock prices on the index. The positive economic developments continue to be reflected in expectations for a continuation of the Fed’s tightening campaign. As of this writing, there is a near 100% probability of a Fed rate hike at the June meeting.

The Look Forward

The market will be looking forward to dissecting the FOMC meeting minutes on Wednesday, as well as paying attention to the full roster of Fed speakers throughout the week.

 

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.

 

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 http://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.

18-0116

Previous Article
Market Insights – May 29, 2018
Market Insights – May 29, 2018

The interesting economic news of the week centered around a rather technical aspect of the Fed’s approach t...

Next Article
Market Insights – May 14, 2018
Market Insights – May 14, 2018

The economic news of the week was all about the inflation landscape, with updates to both consumer and prod...

×

Subscribe to Chatham's weekly Market Insights

First Name
Last Name
Company
!
Thank you!
Error - something went wrong!