INTEREST RATE MARKET INSIGHT
MAY 18, 2015
• Domestic equities and bonds ended the week relatively flat, with the S&P 500 up to • Spending on cars and at department stores just isn't happening yet, per the Census
another record nominal high and the 10-year Treasury yield down one basis point to Bureau data, and consumers aren't buying furniture or eating out as much, either. The
2.14%. More meager data in the US helped the yield curve steepen as Chair Yellen will Empire State manufacturing survey ticked back into the positive for May, but only had
no doubt be less likely to tighten given the soft numbers. With two weeks left until a a reading of 3. Business inventories grew a less than anticipated 0.1% MoM and
potential 'hard stop' for Greece and its IMF life support, all eyes turn to negotiations industrial production fell 0.3% MoM, although revisions to March's numbers helped
Thursday in Latvia to see if the ultimatums finally sink in for Greek leaders. With bank balance out the miss. Initial jobless claims continued to see their best levels in decades,
deposits fleeing more rapidly, the collateral that Greek banks have with the ECB for with 264k new claims bringing the 4-week moving average down to nearly 271k. The
loans has the potential to be haircut and that could trigger a fatal event. With June 5th Treasury auctions last week were better for the 3- and 10-year notes than the 30-year
as the next IMF payment date and a June 3rd ECB meeting, expect some medium term bond, as the former two attracted buy-and-hold accounts after the recent selloff in likeresolution (or chaos) in the coming days. At home, retail sales managed to disappoint maturities. TIC data for March showed American buying of foreign equities over bonds
once again, as the headline figure for April was flat and only up 0.2% ex autos and gas, and foreigners buying US bonds over stocks, leading to a net inflow of $17.6 billion,
well below the positive consensus. Petrodollars not spent are being saved or applied even after Belgium sold some $100 billion in Treasury securities. UofM's consumer
to debt--fiscal discipline, but it hurts GDP! Core and headline producer prices for final sentiment indicator fell sharply MoM to 88.6, even as the report's inflation
demand also fell unexpectedly, -0.4% and -0.2% MoM, respectively. Gold has benefited expectations components rose to nearly 3% for 1- and 5-year forward inflation.
as the dollar has declined against the euro in recent weeks, now above $1,230/oz. Current conditions and expectations were both down 7 points in the release.
• With the upcoming Memorial holiday and a general pause in the data, the next two weeks could feature shallow and choppy waves for asset values until the first week of June
brings a big week for data and the potential for 'Grexit.' There is an early close Friday in the bond market. We will get the FOMC minutes from May this week, along with some
interesting high-season housing data (Homebuilders index, starts, and existing home sales). Economists are optimistic about the sector this month. Leading indicators and the
Philly Fed survey should improve on recent gains when released, and CPI is expected to show headline and core price increases of 0.1% for April.
Index Rates
Last
Week Ago
Month Ago
Year Ago
1-month LIBOR
0.19%
0.18%
0.18%
0.15%
3-month LIBOR
0.28%
0.28%
0.27%
0.23%
6-month LIBOR
0.41%
0.41%
0.40%
12-month LIBOR
0.72%
0.73%
Fed Funds Target
0.25%
Prime Rate
Treasury Rates
Last
Week Ago
Month Ago
Year Ago
2-yr Treasury
0.54%
0.57%
0.50%
0.35%
3-yr Treasury
0.90%
0.93%
0.84%
0.79%
0.32%
5-yr Treasury
1.46%
1.49%
1.32%
1.52%
0.69%
0.53%
7-yr Treasury
1.87%
1.88%
1.65%
2.04%
0.25%
0.25%
0.25%
10-yr Treasury
2.14%
2.15%
1.89%
2.49%
3.25%
3.25%
3.25%
3.25%
30-yr Treasury
2.93%
2.90%
2.54%
3.33%
SIFMA Muni Swap Index
Call
0.10%
0.04%
0.08%
2s-10s Spread
1.61%
1.58%
1.39%
2.14%
Taxable Swap Rates
Last
Week Ago
Month Ago
Year Ago
Tax-Exempt Swap Rates
Last
Week Ago
Month Ago
Year Ago
2-yr LIBOR Swap
Call
0.82%
0.74%
0.48%
2-yr SIFMA Swap
Call
0.41%
0.39%
0.29%
3-yr LIBOR Swap
Call
1.15%
1.03%
0.88%
3-yr SIFMA Swap
Call
0.67%
0.61%
0.57%
5-yr LIBOR Swap
Call
1.60%
1.43%
1.58%
5-yr SIFMA Swap
Call
1.09%
1.01%
1.19%
7-yr LIBOR Swap
Call
1.89%
1.68%
2.06%
7-yr SIFMA Swap
Call
1.40%
1.28%
1.65%
Call
2.16%
1.92%
2.51%
10-yr SIFMA Swap
Call
1.69%
1.54%
All else equal, amortizing swaps and caps will have lower rates and costs, respectively. Please call for specific structure pricing requests.
2.10%
10-yr LIBOR Swap
Agency Rate Caps (in bps)
3-yr LIBOR Cap
4-yr LIBOR Cap
5-yr LIBOR Cap
7-yr LIBOR Cap
LIB O R = 3 % LIB O R = 4 % LIB O R = 5 % LIB O R = 6 %
29
74
135
293
13
34
85
189
12
19
36
133
10
27
48
102
Fwd Implied 3mL Rate
Dec. 15
Dec. 16
Dec. 17
Dec. 18
2 Yr (Blue) & 10 Yr (Red) US Treasury Yield (last 5 yrs)
Last
Conventions
0.54%
1.34%
1.95%
2.36%
Source: Bloomberg. LIBOR swaps use 1-month
LIBOR, monthly payments, act/360 for both legs.
SIFM A swaps reset weekly and pay monthly,
act/act. For %of LIBOR swaps, multiply the %used
by the taxable swap rate. No amortization.
LIBOR Swap Curve - Current (Blue) vs. Year Ago (Red)
4.00%
3.50%
3.50%
3.00%
3.00%
2.50%
2.50%
2.00%
2.00%
1.50%
1.50%
1.00%
1.00%
0.50%
0.50%
0.00%
0.00%
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While Cardea Partners aims to provide accurate data, it cannot be held responsible for any inaccuracies in this distribution. These
remarks are opinions of Cardea Partners’ swap advisors and shall not be considered as advice or solicitation to buy or sell any securities.
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