Market Insights - November 13, 2018

November 13, 2018 Chatham Financial

Policy Rate Unchanged

View this week's rates.

Prior Week Summary

As was widely anticipated, the FOMC kept the policy rate unchanged at a range of 2.0% to 2.25%. There were some small changes to the language in the policy statement, which included a mark-to-market on the growth of consumer spending and acknowledgment of the slowing growth of business fixed investment. The statement acknowledged that “job gains have been strong, on average, and the unemployment rate has declined, household spending has continued to grow strongly, while the growth of business fixed investment has moderated from its rapid pace.”* Importantly, the statement made no mention of the recent tightening of financial conditions, or the increased volatility in equity markets, which is a telling change from the Committee’s recent past.

In other economic news, the October ISM non-manufacturing index registered 60.3 in October, declining from the lofty reading of 61.6 in September. The report detailed that business activity edged down to 62.5 from 65.2, new orders were little changed, while the employment index fell to 59.7 from 62.4.

The market is still broadly pricing in a hike at the December fed meeting with nearly 75% probability, odds which have stayed more or less constant for the last few months. Additional hikes are currently priced in for March and September 2019.

The Look Forward

The data calendar is active on the holiday-shortened week as the market is expecting updates on consumer prices, retail sales, and industrial production.

 

*Source: “Federal Reserve Issues FOMC Statement.”, 8 Nov. 2018, www.federalreserve.gov/newsevents/pressreleases/monetary20181108a.htm.

 

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.

 

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