December 21, 2015
Independent Derivative and Risk Advisors, Providing Interest Rate and Currency Hedging Expertise
Last Week: Rates staged a largely muted response after last week’s much-anticipated hike by the Fed. The
Fed’s move eliminated long pent up uncertainty for bond investors, whose purchases caused Treasury yields from one-month bills to 10-year notes - to fall. The move erased losses from early in the month even as stocks,
commodities and high-yield bonds tumbled. The 10-year ended the week down three bps near 2.20%, while
1-month LIBOR breached .4000.
This Week: Sleepy markets take over in force as we proceed toward week’s end as traders pare their bets and
seek a safe haven from liquidity restricted markets of the holidays. Important measures of GDP, Durable Goods
and home sales dominate the data calendar and aren’t expected to create any surprises.
Take-Away: Downward pressure on Treasury yields is likely to persist as weak global growth, “fully-valued”
equity markets and regulatory changes drive increasing demand for US government debt. This can create a
credibility problem for the Fed as it seeks control of money market rates. In addition, divergent central bank
policies globally are creating an environment of increased volatility in markets that can complicate the Feds
efforts.
It`s unlikely the week ahead will see any great revisions to the post-Fed mood, as a certain degree of
skepticism of what some see as a future series of rate hikes still reins. Early 2016 will bring more clarity as to
where we’re headed, and we see two possible directions forward: a major risk off move dashing Fed tightening
expectations or markets and a global economy that continue to tick along, keeping the Fed on track to hike
several times and the market forced to adjust along the way. Happy Holidays!
10-Year Treasury
Treasury Rates
Last
Week Ago Month Ago
2-yr Trea s ury
0.948
0.944
3-yr Trea s ury
1.269
1.247
5-yr Trea s ury
1.653
7-yr Trea s ury
1.981
10-yr Trea s ury
2.174
Index Rates
Last
1-Month LIBOR
0.413
0.345
3-Month LIBOR
0.586
6-Month LIBOR
Services

Interest Rate and
Currency Hedge
Advising

New Interest Rate
Caps and Swaps

Hedge Modifications
and Terminations

ISDA Negotiations

Dodd-Frank
Compliance

Mark to Market and
Hedge Accounting
LIBOR Futures
Year Ago
Taxable Swap Rates
Last
Week Ago
Month Ago
Year Ago
0.917
0.638
2-yr LIBOR Swa p
Ca l l
1.018
0.959
0.873
1.239
1.088
3-yr LIBOR Swa p
Ca l l
1.256
1.215
1.279
1.653
1.686
1.647
5-yr LIBOR Swa p
Ca l l
1.607
1.578
1.7785
2.012
2.033
1.972
7-yr LIBOR Swa p
Ca l l
1.863
1.835
2.049
2.2217
2.262
2.1618
10-yr LIBOR Swa p
Ca l l
2.1255
2.094
2.2915
Year Ago
Agency Rate Caps
LIBOR = 3%
LIBOR = 4%
LIBOR = 5%
LIBOR = 6%
0.212
0.164
3-yr LIBOR Ca p
16
7
5
5
0.518
0.382
0.252
4-yr LIBOR Ca p
43
20
10
6
0.807
0.749
0.619
0.350
5-yr LIBOR Ca p
87
45
25
15
116
Week Ago Month Ago
12-Month LIBOR
1.114
1.064
0.947
0.617
7-yr LIBOR Ca p
205
Fed Funds Ta rget
0.50
0.25
0.25
0.25
Fwd Implied 3mL Rate
Last
Pri me Ra te
3.50
3.25
3.25
3.25
Dec-16
0.974
SIFMA Muni Swa p
Ca l l
0.01
0.01
0.04
Dec-17
1.496
71
47
Last
FX
Dec-18
1.837
1.0934
Dec-19
1.954
120.95
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