Interest Rate Swap Advisors Cardea Partners Provide Economic Update January 24, 2011

The first FOMC meeting of the year does not approach with any expectation for a shift in policy or an expansion of quantitative easing for 2011
By: Cardea Partners
 
Jan. 24, 2011 - PRLog -- The holiday-shortened week proved to be somewhat sluggish for equities and the bond market, with some mixed earnings and technical breakdowns causing Treasury yields and swap rates to rise ahead of a very exciting upcoming week for the markets.  The curve steepened once again.  The Federal Reserve meets and releases its policy statement this Wednesday after the two-day gathering, preempting the durable goods report and Friday's advance GDP report for the fourth quarter of 2010.  A broad survey of economists project growth of 3.5% as consumer spending picked up steam and companies replenished inventories to healthier levels.  Q3 2010 gross domestic product built up to a finalized growth rate of 2.6%.  The GDP price index will be closely followed as well for signs of inflation--the Q3 level of 2.1% is expected to soften to 1.5% in the most recent quarter.  Last week's housing and manufacturing data came in mixed, with housing starts still weak but existing home sales better than expected as many buyers on the fence may have felt pressure to pull the trigger on a home from persistant rising mortgage rates.  The housing starts report did indicate a swift pick-up in building permits for the month, which bodes well for January and also translated into a better than expected 1.0%+ reading for leading economic indicators for the second consecutive month.  The manufacturing surveys from New York state and Philadelphia showed modest progress but no acceleration for growth in the sector.  In a reversal of last week's disappointing report, jobless claims were down to 404,000 claims, an important trend for employment, the elusive missing and valuable piece of a full economic recovery in the US.  Volatility may return to European credit markets this week as Ireland's ruling party is ceding power to the opposition leadership which could oppose significant bailout measures recently put in place.  Some pundits are also projecting disconcerting events for Egypt and the Middle East region in wake of the Tunisian food crisis and the deposing of their prior leadership.

The first FOMC meeting of the year does not approach with any expectation for a shift in policy or an expansion of quantitative easing for 2011, but the new year brings a change in voting members to the committee, and analysts consider the 2011 bunch to be slightly more hawkish.  If inflation accelerates or energy and food prices continue to be volatile, follow the statements closely and look for the rate-rise seeds to be planted.  $99 billion in Treasury notes will be auctioned mid-week in the belly of the curve at 2-, 5- , and 7-year maturities.  The consensus for new home sale is 300k units on an annualized basis, the expectation for durable goods is an expansion of 1.5% (based on positive manufacturing surveys of late) and indicators for consumer sentiment and confidence are expected to improve slightly from November levels.

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Cardea Partners is a derivatives and debt advisory firm serving the unique needs of corporate, real estate, Native American, not-for-profit, and municipal entities. Registered with the Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB) as municipal advisors, our firm is comprised of highly experienced derivatives professionals, sharing a combined 45 years in the industry and having executed over $1 trillion notional in derivative contracts. Our time spent on the trading floors of major financial institutions allows Cardea to stand beside our clients with comprehensive insight into their banking relationships and the market of products available to manage exposures and limit expenses.
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Source:Cardea Partners
Email:***@cardeapartners.com Email Verified
Tags:Hedging Advisor, Swaps, Derivative, Isda, Swap Advisor, Interest Rate Forecast, Libor, Prime, Treasuries
Industry:Accounting, Banking, Business
Location:Cleveland - Ohio - United States
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