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Rates Update

Published July 18, 2018  /  In Weekly Market Updates

Last Week's Market Moves

Following last weeks strong employment report, Industrial Production rose in June ( +.6% ) driven mainly by gains in manufacturing and mining. Strong industrial production and retail sales together with smaller trade deficits in April and June suggest the U.S economy is accelerating sharply in the second quarter. The housing market index held steady in July at 68 but still off from its highs in the low 70's. Some economists are forecasting GDP growth in the second quarter as high as 5.2% although the median forecast is lower. Still, an increase near or at these levels would be double 1st quarter GDP.





 


What to Look for This Week

Federal Reserve Chairman Jerome Powell delivered his semiannual testimony to Congress yesterday. He reported a largely positive picture of the U.S economy and essentially backed more rate hikes for the balance of 2018. FOMC has increased the Fed's benchmark rate twice this year and is expected to approve two more increases by year-end.

The curve continues to flatten as a majority of economists forecast an inversion in 2019, with Treasury yields holding firm, swap spreads are shrinking providing enhanced value in pay fixed swaps on fixed rate loans or swaps heding liabilities.

 


1-month LIBOR Swap Rates**

MaturityAmortizationSwapMove
3 YearsBullet2.88%- 1 bp
5 YearsBullet2.90%- 1 bp
7 YearsBullet2.91%- 1 bp
10 YearsBullet2.93%- 2 bp
12 YearsBullet2.95%- 2 bp
15 YearBullet2.96%- 2 bp
20 YearBullet2.96%- 2 bp

Treasury Market

TreasuriesYieldMove
2 Years2.61%+ 4 bp
3 Years2.68%+ 2 bp
5 Years2.76%+ 1 bp
10 Years2.86%+ 1 bp
30 Years2.97%+ 1 bp
Move signifies change in swap rates or treasuries since 7/10/2018

**Note: Rates above are mid-market swap rates as of NY market close 7/17/2018. All rates are subject to change. Dealer pricing may include additional swap fees, contact PRM for swap pricing analysis and a detailed report on pricing, pre-payment risk and swap fees.

Disclaimer: The purpose of this communication is to provide general information and estimates as of swap pricing for indicative purposes only. To obtain an independent swap quote and swap risk evaluations for a specific financing please call PRM Swap Desk with the terms of the proposed transaction. PRM offers independent pricing for interest rate swaps, caps, floors, swaptions as well as analysis of swap, fixed rate loan and insurance loan pre-payment risk.