Feb 5. Sr Loan Officers reflect tighter conditions

–Quiet session on Monday.  Yields pressed higher, with tens up 3.6 bps to 2.722%.  EDZ9/EDZ0 is again the lowest one-year calendar on the eurodollar strip, settling at -15.0.  Jan 2020 FF settled -2.0 at 9761.0; every contract in this calendar year of 2019 is within one basis point of the current 2.40% Fed Effective.  

-Treasuries seeing a concession in front of auctions, which kick off with $38 billion in 3’s today, followed by $27b tens and $19b 30’s Wednesday and Thursday.  ESH9 at a slight new high for the year at 2726.00.

–Trump’s State of the Union this evening.  Economic news today includes ISM Services, expected 57.1 from 57.6 last.  Below is a chart of Mfg and Service PRICE categories.  Mfg prices took a large tumble last week to 49.6, lowest since Q1 2016.  Service prices are much more stable at 58.0 last.–The Fed released the Senior Loan Officer survey for Q4.  Not surprisingly, given the equity market decline in Q4, the report is downbeat.  Here are a couple of excerpts:

**On balance, banks reported expecting tighter standards, weaker demand, and worse loan performance, for most loan categories. [in 2019]

**Regarding expectations for loans to businesses, moderate net fractions of banks reported that they expect to tighten standards on C&I loans to firms of all sizes, while significant net shares of banks expect to tighten standards for all three CRE loan categories. Meanwhile, demand is expected to weaken for all business loans: Moderate net shares of banks reported expecting weaker demand for C&I loans to firms of all sizes…

**The outlook for loans to households over the next year is broadly similar to the outlook for loans to businesses…

**An expected deterioration in collateral values was the most widely cited reason for expecting to tighten standards. In addition, a majority of banks reported that an expected reduction in their risk tolerance and an expected deterioration in the quality of their loan portfolios contributed to the expected tightening of standards.

Posted on February 5, 2019 at 4:58 am by alexmanzara · Permalink
In: Eurodollar Options

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