Rates remain relatively range bound and CARES Act discussions pick up
- September 28, 2020
Corporates | Denver, CO
SummaryFed Chair Jerome Powell testified before Congress twice this week on the CARES act, commenting that, while the economy has been doing better than expected, there is risk that growth will slow if an additional relief package is not agreed upon.
Additionally, as Congress pressed for increased lending to small businesses, Powell re-emphasized his stance that the Fed currently doesn’t have a facility in place to underwrite and issue loans to hundreds of thousands of small businesses. He noted that those actions are better handled through the Paycheck Protection Program, which expired in August and has not been reauthorized as part of the current relief negotiations.
Interest rates remained relatively flat this week as the 10-year treasury bounced within a 4 basis point range, ending the week at 0.658%, begging the question of whether the 10-year has bottomed out and if the Fed is running low on ammo. With that said, the current rate environment continues to be attractive to corporates looking to either issue fixed rate debt or hedge floating rate debt.
EUR-USD and GBP-USD rates fell this week and are poised to slide lower as a second wave of COVID-19 infections may be beginning in Europe.
With so much uncertainty surrounding COVID-19, U.S. elections, Brexit, and oil market volatility, corporates continue to seek more accurate, relevant inputs for planning and budgeting seasons. Many leverage technology to aggregate foreign currency exposures, inform hedging decisions, and add efficiency, structure, and transparency to the process. To inform strategic and tactical decision making, many also employ enhanced management reporting to capture and aggregate data from across the organization. In unpredictable markets, treasury teams are looking to better manage the inputs they can control.
Volatility is expected as the market reacts to the first Presidential Debate on Tuesday, September 29. Calendar quarter end companies will be closing out the third quarter on Wednesday, September 30 and nonfarm payrolls numbers will be released on Friday, October 3.
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.
Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.20-0378
Our featured insights
Inflation continues to rise as crypto plunges
Inflation numbers are hot off the press and exceeding expectations as reports that the price of goods and services rose by 8.3% since last April. Although there is hope that we are falling from the peak numbers seen in March, consumer fears of a recession are growing and permeating the market —...
Hedging fundamentals webinar series
Join these introductions to hedging and hedge accounting to gain a foundation for managing financial risk.
Fed raises rates amid a plethora of employment data
The Federal Reserve raised the Fed Funds rate by 50 bps, bringing in the largest hike since 2000 in an effort to fight the highest inflation rate the country has seen in 40 years. Job openings and job quits hit record highs in March, while April nonfarm payrolls came in above expectations.
Mixed first quarter sets stage for volatile year
The familiar story of global volatility continues. U.S. GDP stumbled for the first time since early in the pandemic. Global currencies weakened against the dollar, as dollar strength reached its highest levels since the early 2000s. Supply chain concerns rise from record diesel fuel prices.
Uncertainty continues as markets respond to imminent rate hikes, war in Ukraine
Inflation and global turmoil continue to plague the international markets as the war in Ukraine persists. Market expectations in response to impending further rate hikes by the Federal Reserve pushed stocks down and bond yields higher. Stronger relative performance in the U.S. pushed the dollar...
Hedging future fixed-rate debt
Corporations can take advantage of the current rate environment to re-assess their interest rate exposure. Locking in rates on future fixed-rate debt issuances can be particularly advantageous because of the current flattening of the forward curve and substantial global market uncertainty.
How to maintain treasury proficiency and continuity amid the “Great Resignation”
Today’s job market creates challenges and opportunities for treasury teams. While high turnover warrants increased focus on retention and contingency planning, it also offers the chance to attract new talent, reinvent your team dynamic, and streamline operations.
Headline inflation hits 40-year highs, recession chatter echoes throughout markets
Headline CPI data surpassed its 40-year high in March but slowing core inflation provided investors with a glimmer of optimism. Markets are closely monitoring Fed movements as Chairman Powell attempts to navigate a difficult balancing act of cooling off alarmingly high price pressures while...