Credit Market Report

August 15, 2017

Treasurys face selling as geopolitical tensions are dialed back: Treasurys faced selling pressure Monday, pushing yields higher, as investors that sought havens in U.S. government paper last week amid North Korean geopolitical concerns rotated back into stocks and other assets perceived as risky.

Influencing Factors:

  • Investors sold government paper in early trade at New York after an abatement of intensifying war talk between North Korea and President Donald Trump’s administration, which had increased demand for assets perceived as safe, including gold and Treasurys. A lack of new global developments over the weekend, which turned Trump’s attention to the violent events in Charlottesville, Va., helped to lift stocks while diminishing the appetite for other haven investments including the Japanese yen and gold.
  • Later in afternoon trading, Treasury yields extended their intraday gains across the board, meaning a pullback in bond prices, after New York Fed President William Dudley, one of the most influential members of the central bank’s policy-setting panel, said he would support an interest-rate hike later this year as financial conditions continue to be easy. Higher short-term interest rates are bearish on government paper. In addition, if the economy continued to show robust growth and strength in the labor market, it would “get to the point where that will lead to higher wages and that will show up in terms of higher inflation,” Dudley said. But some investors suggested his optimistic remarks stretched credulity amid the steady downtrend in inflation.
  • Looking ahead, market participants will focus on the release of the minutes from the July meeting of the policy-setting Federal Open Market Committee on Wednesday. The raft of tepid economic data last week, including a weaker-than-expected inflation reading for July, has added to concerns that the Federal Reserve would find it difficult to raise interest rates this year.

Fixed Rate Indices

Maturity Coupon Yield Change
2-year... 07/19 1 1/4% 1.322%   ( + )
5-year... 07/22 1 3/4% 1.769%   ( + )
7-year 07/24 2 % 2.031%

  ( + )

10-year 08/27 2 3/8% 2.217%   ( + )
30-year 08/47 3 % 2.805%   ( + )
Treasury Rates are as of 08-14-2017 as reported by The Wall Street Journal.

Prime Rate

Prime... 4.25%
Last effective change 6-15-2017

Floating Rate Indices

30-day LIBOR..... 1.22778%
90-day LIBOR..... 1.31417%
6-month LIBOR... 1.45000%
1-year LIBOR...... 1.71789%

London Interbank Offered Rates are as of 08-14-2017 as reported by The Wall Street Journal.

Spread Markets

Maturity Spreads Rate
2-year SWAP.... 24.40 bps 1.5660%
5-year SWAP.... 7.20 bps 1.8410%
7-year SWAP.... -3.30 bps 1.9980%
10-year SWAP... -4.90 bps 2.1680%

SWAP Rates are as of 08-14-2017 as reported by the Wall Street Journal.