Current Dynamics

US Treasury yields and swap rates are higher so far in May following April’s better-than-expected US payroll outcome and increased talk by some FOMC officials over potentially slowing the pace of Fed asset purchases.  While recent job growth trends are aligned with what was observed earlier this year, the bulk of US economic data recently has been mixed signaling growth conditions remain moderate. Overall, interest rates remain largely range bound, moving in a contained manner along with Fed & economic developments.

Risk Appetite

US public equity market capitalization increased $2.7 Tn in the first 4.5 months of 2013, noticeably outpacing the advance seen during the same period last year. This year’s stock market rally, leading to record highs in the S&P 500 index & Dow Jones Industrial Average, has benefited  from significant liquidity, expansionary monetary policy, mostly decent corporate profits, calmer European markets, some improving US data and a few favorable fiscal developments despite Washington’s slow-moving budget debate.

Libor Expectations

On May 1, the FOMC reiterated that its 0 to 0.25% fed funds target will be appropriate as long as US unemployment remains above 6.5% & the Fed’s 1 to 2-year inflation projections are no higher than 2.5%. The Fed indicated L/T inflation expectations must stay well anchored. A focus on the Fed’s economic forecasts may provide scope on how policy considerations evolve. To the extent unemployment falls and inflation increases, views on Libor  are most likely to be impacted.

Interest Rate Management (IRM)

Variable rate debt financing may create interest rate risk for the corporate borrower. The IRM team gives GE Capital borrowers access to providers of interest rate hedging transactions to mitigate that risk.

The following publications summarize key events, economic data, and indicators that influence markets.

Publications