Credit Market Report

October 23, 2017

10-year Treasury yield posts biggest jump in five weeks on hopes for tax overhaul: Treasury prices tumbled Friday, pushing yields firmly higher, to cap a weeklong selloff in government paper as the Senate passed a budget resolution that helps clear the way for tax cuts. Earlier in the week, Fed Chairwoman Janet Yellen reaffirmed her call to continue raising interest rates as speculation over her potential successor gained traction.

Influencing Factors:

  • The Senate late Thursday passed a budget plan, helping clear the way for a package of tax cuts. Key House and Senate lawmakers privately hammered out a compromise Thursday that would likely eliminate the need for a conference committee, buying Republicans at least a week to do more tax work. Tax cuts have been viewed as one important leg to a slate of pro-business legislations championed by President Donald Trump during his 2016 presidential campaign.
  • Yields also traveled higher amid speculation that the next Fed boss could have more hawkish leanings, if Trump does not nominate Yellen.
  • If tax cuts widen the federal budget deficit, it could exert further pressure on the bond market as the Treasury Department would have to issue more debt to make up for the shortfall, said Michael Collins, a money manager at PGIM Fixed Income. An influx of new supply could drown out demand, pushing prices lower and yields higher. The U.S.’s budget deficit hit $666 billion in fiscal 2017, the largest since 2013.

Fixed Rate Indices

Maturity Coupon Yield Change
2-year... 09/19 1 2/8% 1.580%   ( + )
5-year... 09/22 1 6/8% 2.022%   ( + )
7-year 09/24 2% 2.232%

  ( + )

10-year 08/27 2 3/8% 2.381%   ( + )
30-year 08/47 3 % 2.893%   ( + )
Treasury Rates are as of 10-20-2017 as reported by The Wall Street Journal.

Prime Rate

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

Floating Rate Indices

30-day LIBOR..... 1.23788%
90-day LIBOR..... 1.36476%
6-month LIBOR... 1.55489%
1-year LIBOR...... 1.83122%

London Interbank Offered Rates are as of 10-20-2017 as reported by The Wall Street Journal.

Spread Markets

Maturity Spreads Rate
2-year SWAP.... 23.10 bps 1.8110%
5-year SWAP.... 7.00 bps 2.0920%
7-year SWAP.... -1.90 bps 2.2130%
10-year SWAP... -2.70 bps 2.3540%

SWAP Rates are as of 10-20-2017 as reported by the Wall Street Journal.