Credit Market Report

May 18, 2018

30-year U.S. government bond yield hits nearly 3-year high: Treasury yields extended their weeklong climb on Thursday as higher growth and inflation expectations, along with concerns of a more aggressive Federal Reserve weighed on appetite for U.S. government bonds.

Influencing Factors:

  • U.S. yields rose sharply this week after solid economic data rekindled speculation the Federal Reserve may have to raise interest rates more aggressively than previously expected. A strong retail sales figure kick started the selloff, sending the 10-year Treasury note yield above the 3% level on Tuesday. The Conference Board’s leading economic index advanced 0.4% in March, showing the economy still had plenty of steam.
  • The global oil benchmark LCON8, -0.11% touched $80 a barrel after the potential return of U.S. sanctions in Iran clouded the outlook for crude production. That may be contributing to the cocktail of inflationary pressures driven by the recent tax cuts and the tightest labor market in years. The 10-year break-even inflation rate, the average market expectation for inflation over the next 10 years, rose as high as 2.21% on Thursday, close to a four-year high
  • Weekly jobless claims rose to 222,000 for the week ending May 22. Meanwhile the Philadelphia Fed manufacturing index rose to 34.4 in May, its strongest reading in a year, from 23.2 in the previous month.

Fixed Rate Indices

Maturity Coupon Yield Change
2-year... 04/20 1 2/8% 2.571%   ( - )
5-year... 04/23 1 6/8% 2.932%   ( - )
7-year 04/25 2 0/8% 3.063%

  ( + )

10-year 05/28 2 3/8% 3.109%   ( + )
30-year 05/48 3 % 3.245%   ( + )
Treasury Rates are as of 05-17-18 as reported by The Wall Street Journal.

Prime Rate

Prime... 4.75%
Last effective change 03-22-2018

Floating Rate Indices

30-day LIBOR..... 1.94775%
90-day LIBOR..... 2.33125%
6-month LIBOR... 2.49938%
1-year LIBOR...... 2.76648%

London Interbank Offered Rates are as of 05-17-18 as reported by The Wall Street Journal.

Spread Markets

Maturity Spreads Rate
2-year SWAP.... 24.20 bps 2.8130%
5-year SWAP.... 10.60 bps 3.0380%
7-year SWAP.... 2.50 bps 3.0880%
10-year SWAP... 3.40 bps 3.1430%

SWAP Rates are as of 05-17-18 as reported by the Wall Street Journal.