Rates remain relatively range bound and CARES Act discussions pick up
- September 28, 2020
Corporates | Denver, CO
Fed 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.
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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
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