Trade Posturing

May 20, 2019 Chatham Financial

Prior Week Summary

U.S. equity markets ended lower last week as the escalation of the U.S./China trade dispute weighed on investor sentiment. After the U.S. increased tariffs on $200 billion of Chinese goods, China announced retaliatory tariffs ranging from 10% to 25% on $60 billion of U.S. goods beginning on June 1st. Reports on Friday afternoon suggested that the negotiations have stalled as China appears unwilling to renegotiate the concessions they reneged on earlier this month. In other trade news, the U.S. agreed to lift steel and aluminum tariffs on Canada and Mexico, a necessary step toward the ratification of the United States-Mexico-Canada Agreement. Additionally, the Trump administration announced a six-month delay on imposing automobile tariffs on the E.U. and Japan as trade negotiations are expected to continue.

Cross-party negotiations between the U.K. government and the Labour party have broken down after the two sides failed to reach a substantial compromise over how to handle Brexit. Jeremy Corbyn, Leader of the Labour Party, highlighted his party’s opposition to the proposal after the breakdown in talks saying, “I should reiterate that, without significant changes, we will continue to oppose the government’s deal as we do not believe it safeguards jobs, living standards and manufacturing industry in Britain.” Prime Minister Theresa May plans to bring her Brexit proposal to vote for a fourth time in early June, but it is unlikely to receive the required votes to pass in its current state.

The Look Forward

In a light week for economic data, market participants will get updated data on new and existing home sales, as well as durable goods orders. The Federal Reserve releases the Minutes from the latest FOMC meeting 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.

 


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. 19-0129

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