Market Insights – September 4, 2018

September 4, 2018 Chatham Financial

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View this week's rates.

Prior Week Summary

It was a relatively slow week in the markets as many seemed to be enjoying an extended vacation in advance of the long Labor Day holiday weekend. Rates stayed well within recent ranges, as the 10-year Treasury Note spent most of the week within a 3-4 basis point range. In economic news, the Commerce Department reported an upward revision to second-quarter GDP on higher than estimated increases in software spending and import figures that were adjusted lower. The report detailed that GDP is estimated to have grown at a 4.2% annualized rate in the second quarter, as consumer spending, which is the largest part of the economy, grew at a 3.8% rate.

Consumer sentiment, as measured by the Conference Board, rose in August to the highest level since late 2000, rising to an index level of 133.4. The report suggests that consumers may be a source of strength in the current environment, as they spend their disposable income on durable goods. It is somewhat interesting to note that the strength in the Conference Board’s survey of consumer sentiment was not confirmed by the widely followed University of Michigan survey, which has declined recently.

The Look Forward

Markets will look forward to the release of August payrolls data on Friday for direction into the September Fed meeting. As of this writing, the consensus expectation is for a 195,000 increase in payrolls and a 3.8% unemployment rate.

 

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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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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