This material is not a research report prepared by Chatham Hedging Advisors. 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. 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. Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. For further information, please visit /legal-notices. 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. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. It would be wise to keep this possibility in mind and consider the potential market impact if Powell is incorrect on transitory inflation, re-pricing an increased pace of tapering or future rate increases, with key catalysts coming from employment and inflation data.Ĭhatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. While Powell is continuing with the view that current inflationary pressures are transitory, continued inflation in stickier prices such as housing and rent costs or in consumer goods prices could test this view. In summary, the two biggest drivers for the timing and magnitude of policy tightening are labor market improvements and sustained, non-transitory inflation. Housing costs account for ~24% of the personal consumption expenditures index, so this may be a key indicator for the future path of interest rates. Rents have also increased, with the national median rent increasing by 11.4% so far in 2021. Supply chains and labor market conditions will continue to influence the time required and cost to build new construction. Movement to lower-cost regions in the era of remote work has also had major impact on certain markets. Temporary interruption of new supply, record low mortgage rates, and a boost in demand for homes have led to a 16.6% YoY increase in home prices in May 2021. Real estate markets have also seen major impacts from the pandemic and Federal Reserve policy response. Supply chain disruptions are ongoing which will likely continue to flow through to inflation data. On the fiscal front, proposed stimulus bills face an uncertain future with a September 27 House vote deadline for the $1 trillion bipartisan infrastructure bill and the $3.5 trillion budget proposal still caught up in negotiations between progressives and centrist Democrats. Pandemic unemployment assistance is scheduled to expire on September 6 and the Supreme Court recently blocked the CDC’s eviction moratorium on August 26. Looking forward, there are many major changes on the horizon that will flow through to the economy and markets. Federal funds futures are currently pricing in a 56% probability of at least one rate hike by December 2022, down from a peak of 74% this June. The Fed chair made it clear that after tapering they would be patient and data-dependent on increasing rates, which caused the shorter-term treasury yields to decrease as the market’s rate hike expectations moved further out. One major point of emphasis in the tightening discussion is a gap in timing expectations between tapering and rate increases. Tools & Technology Canadian Market Rates.Tools & Technology European Market Data.Solutions Regulatory Compliance Advisory.Solutions Foreign Currency Risk Management.Solutions Interest Rate Risk Management.Text that says Financial on the second line. Chatham Financial logo Text that says Chatham on first line.
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