April 17. Tapping Credit Lines??
“Data available for the first quarter of this year have been notably weak” Atlanta Fed’s Lockhart said yesterday. The Atlanta Fed’s GDP-Now model had an estimate of Q1 GDP at 2.3% in the middle of February, which was down to +0.3% just one month later and is now +0.1. That’s a remarkable slide. So the market has squeezed out the odds for a rate hike in June, and is further lessening the probability of a rate hike this year. All near euro$ calendar spreads made new lows. June/Sept is just 11 bps and Sept/Dec settled at 15. January 2016 Fed funds settled at a new high of 99.615, just 38.5 bps. As the front end re-prices rate hike odds, the curve steepens further back. 5/30 treasury spread made a new recent high of 127 up 3.6 bps on the day. Ten year inflation indexed note yield closed at just TWO and a HALF bps.
–Reuters had a ‘positive’ article noting that companies are tapping greater percentages of their available credit: (Reuters) – U.S. banks are reporting that companies are tapping more of their credit lines to fund hiring and expand their businesses, a promising sign for the economy. Commercial borrowers are using two or three percentage points more of their credit lines than they were a year ago, reaching levels not seen since before the financial crisis was at its height in 2009…”
–“a promising sign for the economy”?? I’m not so sure that this a sign of confidence; it could actually reflect STRESS.
–However, there’s no stress in the VIX, holding steady near the year’s low at 12.7.
–Greek yields new highs, German yields new lows.
–US news today includes CPI, expected +0.2 with Core +0.1. Leading Indicators expected +0.3.
