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Monday | April 21, 2014

Looking Back...

  • Treasury yields and swap rates began the week at the low-end of their recent ranges but saw a sharp sell-off on Thursday as economic data surprised to the upside and equities regained much of their recent losses. The belly of the curve remained the most volatile with the 7-yr Treasury yield increasing 10.25 bps on Thursday. On the week, 5-, 7-, and 10-yr yields increased 16, 14, and 10 bps, respectively.
  • In a speech before the Economic Club of New York on Wednesday, Fed Chair Yellen emphasized her beliefs that the labor market still has significant room for improvement citing "full employment" as 5.2% to 5.6% Unemployment Rate. With regards to her overall outlook, Yellen stated, "This shortfall remains significant, and in our baseline outlook, it will take more than two years to close."

Looking Ahead...

  • Yields have continued to remain range-bound with the 10-yr Treasury trading between 2.60% and 2.80% since the end of January. In the month of April, these levels have only been briefly broken twice. However, in the months ahead, these levels could be tested in the event that geopolitical concerns and social tensions escalate in either Ukraine or Syria, sparking a flight to quality among investors. Furthermore, as Yellen's scope of economic data has expanded, releases such as Inflation and the Labor Participation Rate will carry more weight in the markets as will all Fed speak regarding the timing of the first rate hike.
  • They belly of the curve has been the most sensitive to economic data releases and FOMC commentary about rate hikes. Volatility in 5- and 7-yr yields has made the long-end more attractive relative to recent highs. Corporates expecting to issue 30-yr bonds in six months have the ability to lock in a forward rate only 10 bps above the current spot rate.

The information represented herein was obtained from various sources, which we believe to be reliable.  Neither the information presented nor opinions expressed constitutes an offer to buy or sell any security. And it is not intended to guide the investor on which securities to buy, or when to buy or sell.


Cash Management
Managed Liquidity
<$500K $500K-$10M >$10M
0.03% 0.08% 0.13%
Overnight Loan
Structured Certificates  
Fix/Call K195 (1.5 NC 3) 0.40%
Fix/Call K196 (2 NC 3) 0.55%