Market Insights - November 26, 2018

November 26, 2018 Chatham Financial

Short Week, Lots of Noise

View this week's rates.

Prior Week Summary

The recent round of market volatility continued during the Thanksgiving holiday shortened week, with equities falling nearly 5%, WTI Crude falling approximately 10.5%, and the 10-year Treasury note yield hitting the lowest level in about two months. The last few days have been short on economic catalysts, given the mid-week holiday break, but the data that did come in skewed weak. The National Association of Home Builders reported that their index unexpectedly fell to 60 in November as rising rates have left many less optimistic about the state of the housing market. The drop represented the largest decline in the index since 2014 as higher mortgage rates weigh on housing demand. Importantly, the report also detailed that expected buyer traffic fell below the 50 level, which may indicate further weakness in the months ahead.

In other economic news, the University of Michigan consumer sentiment indicator fell to 97.5 in November from 98.6 in October. The report detailed that the expected change in inflation over a one year period fell by 0.1% in November to 2.8%, while the expected change in median prices over a 5-10 year period rose by 0.2% to 2.6% in November.

The Look Forward

After a few days off, the market will need to digest a large amount of incoming economic data, including updated readings on GDP, Personal Income and Spending, as well as the minutes of the November FOMC meeting. There are also a good number of Fed speaking engagements, including the Chairman speaking at the Economic Club of New York on Wednesday.

 

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.

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