Credit Market Report

March 19, 2018

10-year Treasury yield posts largest weekly drop in more than 2 months: Treasury yields on Friday booked a weekly drop as geopolitical instability kept investors pouring into the perceived safety of government paper, but for the day, rates of government paper rose as a robust raft of economic data suggested U.S. growth would maintain its steady clip, ahead of a key monetary-policy update on Wednesday.

Influencing Factors:

  • The 10-year Treasury note yield struggled to push higher this week as mixed economic data halted some of the bearish sentiment that has pervaded the security in past weeks. That has left investors and economists debating whether the U.S. has started to run out of steam in the first-quarter. Concerns that inflation would flare-up and erode the purchasing power of Treasurys, and pushing the Federal Reserve to hike rates more than three times this year have unnerved financial markets in recent months.
  • But at least on Friday, the data suggested there was still plenty of life in the U.S. economy, pushing the 2-year yield to its highest levels since 2008. Short-dated yields also rose as investors began to look ahead to next week’s Fed policy meeting, where Jerome Powell will preside over his first news conference as chairman of the central bank. Traders are pricing in a 94.4% chance of a quarter-of-a-percentage point rate increase on March 21.
  • “There’s still value in Treasurys. There’s been buyers on the long-end, flattening the curve,” said Gregory Peters, senior portfolio manager for PGIM Fixed Income, referring to the yield curve, a line tracing out a bond’s maturities against its yields. Usually that line slopes up the as the maturities get longer because investors demand higher rates in exchange for lending money. However, a flattening yield curve has tended to signal that investors are bearish on the longer-term economic outlook.

Fixed Rate Indices

Maturity Coupon Yield Change
2-year... 02/20 1 2/8% 2.295%   ( + )
5-year... 02/23 1 6/8% 2.645%   ( + )
7-year 02/25 2 0/8% 2.782%

  ( + )

10-year 02/28 2 3/8% 2.848%   ( + )
30-year 02/48 3 % 3.081%   ( + )
Treasury Rates are as of 03-16-18 as reported by The Wall Street Journal.

Prime Rate

Prime... 4.50%
Last effective change 12-14-2017

Floating Rate Indices

30-day LIBOR..... 1.82207%
90-day LIBOR..... 2.20175%
6-month LIBOR... 2.36363%
1-year LIBOR...... 2.61450%

London Interbank Offered Rates are as of 03-16-18 as reported by The Wall Street Journal.

Spread Markets

Maturity Spreads Rate
2-year SWAP.... 30.00 bps 2.5950%
5-year SWAP.... 14.00 bps 2.7850%
7-year SWAP.... 5.60 bps 2.8380%
10-year SWAP... 3.30 bps 2.8810%

SWAP Rates are as of 03-16-18 as reported by the Wall Street Journal.