Originally published by Rivkin Securities
US stocks climbed on Friday although a drop right at the close took away some of the gains. The Dow Jones Industrial Average finished up 0.3% while the S&P 500 ended just 0.15% higher. The S&P/ASX 200 closed higher on Friday and futures are up 27 points this morning.
Spreads between the amount banks charge each other for short term lending and the official interest rate have been widening recently. For example, in Australia the Bank Bill Swap rate (BBSW) has been climbing over the past several weeks despite no official interest rate rises from the Reserve Bank. This isn’t isolated to Australia, however, as similar spread increases are occurring in global markets such as the LIBOR-OIS spread. The causes of this are not known for certain although there is speculation that it is the result of US dollar funding becoming less available outside of the US due to a range of factors. One such factor is the repatriation of US dollars back into the US in response to the current administrations tax policies.
The Atlanta Fed made a new update to its predicted first quarter GDP model with the current prediction sitting at 1.8%. With the Federal Open Market Committee (FOMC) due to meet this week it will be interesting to see how it will respond to such a weak expected growth rate for the first quarter. Current expectations are still for a 25 basis point rate hike this week with the CME FedWatch tool estimating a 95% chance of such a hike. Assuming the Fed hikes, it will bring US rates above Australian rates for the first time in 15 years.
Later this week the Bureau of Statistics will release Australia’s employment data for the month of February. In addition, both the US and Great Britain central banks will be making interest rate decisions this week.
Data Releases:
- No Significant Data