Credit Market Report

September 20, 2017

Treasury yields jump after Fed signals support for another rate hike in 2017: Treasury prices fell and yields across the board rose on Wednesday after the Federal Reserve’s policy statement revealed most of the central bank’s rate-setting committee wanted to see another rate increase in 2017, despite tepid inflation data in the past few months.

Influencing Factors:

  • The Fed kept its benchmark interest rate unchanged between 1% to 1.25%, but said it would begin its historic wind-down of the central bank’s $4.5 trillion balance sheet in October. Taken together the asset-portfolio reduction and further increases to interest rates are likely to tighten monetary policy, pushing borrowing costs up and encouraging traders to sell existing bonds in anticipation of richer yielding issuance in the future.
  • Yet, many U.S. central bankers, including New York Fed President William Dudley, have recently acknowledged the past few months of lackluster inflation readings had thrown doubt on the outlook for higher interest rates. In a news conference, Fed Chairwoman Janet Yellen echoed this sentiment saying incoming data would decide the policy path.
  • To support their hawkish stance, Fed officials insisted that labor markets would continue to tighten, allowing inflation to eventually pickup. “That feeds into their party line to hike rates, as long as we don't have a huge shock in the labor markets,” said Victoria Fernandez, managing director of fixed-income investments at Crossmark Global Investments. “They have to hike rates to meet their forecasts, whether they like it or not.”

Fixed Rate Indices

Maturity Coupon Yield Change
2-year... 08/19 1 2/8% 1.442%   ( + )
5-year... 08/22 1 6/8% 1.881%   ( + )
7-year 08/24 2% 2.113%

  ( + )

10-year 08/27 2 3/8% 2.276%   ( + )
30-year 08/47 3 % 2.821%   ( + )
Treasury Rates are as of 09-20-2017 as reported by The Wall Street Journal.

Prime Rate

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

Floating Rate Indices

30-day LIBOR..... 1.23556%
90-day LIBOR..... 1.32306%
6-month LIBOR... 1.48000%
1-year LIBOR...... 1.74733%

London Interbank Offered Rates are as of 09-20-2017 as reported by The Wall Street Journal.

Spread Markets

Maturity Spreads Rate
2-year SWAP.... 20.50 bps 1.6470%
5-year SWAP.... 2.10 bps 1.9020%
7-year SWAP.... -7.60 bps 2.0370%
10-year SWAP... -8.40 bps 2.1920%

SWAP Rates are as of 09-20-2017 as reported by the Wall Street Journal.