Treasuries are rallying this morning, mostly in sympathy with strong buying of German bonds and better buying from Asian investors. Global equity indices are also higher for the most part today with no major headlines affecting markets. In short-term rates, LIBOR continues to move higher, with the 3-month fixing up another basis point to 1.956% today. Further, the 3-month LIBOR/OIS (overnight index swap) spread is up to 35 bps, the third widest gap in the post-crisis period. This is an important metric for cash/money markets, and the floating-rate leg of an OIS is the effective fed funds rate. Typically, a divergence between LIBOR and fed funds is related to credit concerns in the financial markets (financial crisis, Eurozone debt crisis, etc.) or a regulatory event/shift (e.g., 2016 money market reform). However, the widening that has occurred over the last couple of months is not really tied to either catalyst. Some have suggested that corporate cash repatriation following tax reform might be at least partly responsible, but there no hard evidence at this point.

Jason Haley
Managing Director, Investment Management Group

2/21/2018MBA Mortgage Applications-6.60%-4.10%
2/21/2018Markit US Manufacturing PMI55.555.955.5
2/21/2018Markit US Services PMI53.755.953.3
2/21/2018Markit US Composite PMI55.953.8
2/21/2018Revisions: Existing Home Sales
2/21/2018Existing Home Sales5.60m5.38m5.57m5.56m
2/21/2018Existing Home Sales MoM0.50%-3.20%-3.60%-2.80%
2/21/2018Bloomberg Economic Expectations54.552.5
2/21/2018Bloomberg Consumer Comfort56.657
2/21/2018FOMC Meeting Minutes
2/22/2018Initial Jobless Claims230k222k230k229k
2/22/2018Continuing Claims1935k1875k1942k1948k
2/22/2018Leading Index0.70%1.00%0.60%
2/22/2018Kansas City Fed Manf. Activity181716