H2C INDUSTRY INSIGHTS: CAPITAL MARKETS

Interest Rates and Economy 

Week of November 14, 2022

Interest Rates & Economy

Interest Rate Update (1)

• For the fourth consecutive meeting, the FOMC raised the Federal Funds Target Rate by 75 basis points. The FOMC’s most recent Assessment of the Appropriate Federal Funds Rate indicated that the Fed would raise the target to 4.375% by the end of 2022. If the Fed still holds this view, it would mean an additional 50bp rate hike in December (2).

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• The 2-yr Treasury (UST) rose by 4bps since last month to 4.34%. The 10-yr UST yield is 3.82% and the 30-yr UST is at 4.03%, representing a month-over-month (“MoM”) decrease of 11bps and an increase of 11bps, respectively.  

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• 2-yr UST remains higher than 10- and 30-yr yields by 52bps and 31bps, respectively. 

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• 2-yr MMD increased 8bps MoM to 3.01% . 10-yr MMD fell by 2bps MoM to 3.14% and 30-yr MMD is 3.88%, a MoM increase of 14bps. 

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• SIMFA fell by 24bps MoM to 2.19%. 1m LIBOR increased 54bps to 3.88% and 1m Term SOFR fell 1bps to 3.79%

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Economic And Financial Update​

• The persistent labor shortage continues to strain the US economy. According to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Summary, the number of job openings increased by 437 thousand in September to 10.7 million. 

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• The two job sectors with the largest increases to September job openings were Accommodation and Food Services  (+215 thousand) and Health Care and Social Assistance (+115 thousand). Alternatively, State and Local Education saw a decrease of 40 thousand hires in the month of September. ​

• The September Quits Rate (the number of quits divided by total employment) is expected to be 2.6% for Healthcare and Social Assistance and 6.1% for Accommodation and Food Services. 

• As a result of the staffing shortage, average weekly wages have increased for nearly all industries. Since February 2020, average weekly earnings among hospital employees have grown 21.1% compared to an increase of 13.6% among all private sector employees (3).​​​

% of Time Rates have been Lower than Current Levels over 30 Years​

Wall Street Forecast

1. Rates and ranges as of November 10, 2022​

2. Source: The Federal Reserve’s “Summary of Economic Projections” released on September 21, 2022​

3. Source: Fitch Ratings report “Labor Strife to Continue for U.S. NFP Hospitals Despite Reprieve” (October 25, 2022) ​

4. Additional sources: Bureau of Labor Statistics “Job Openings and Labor Turnover Summary” (as of November 1, 2022) and “Employment Situation” (as of November 4, 2022), Bloomberg, Refinitive/TM3 

Key Rate Updates

Source: U.S. Department of the Treasury, Bond Buyer, Investment Company Institute, Bloomberg and Refinitiv/TM3. Data as of November 10, 2022.​

(1)  Weekly SIFMA and SIFMA/1M-LIBOR rates as of November 9, 2022.​

The information presented herein was obtained from resources believed to be reliable and accurate, but H2C Securities Inc. does not guarantee the accuracy or completeness or assume a responsibility for any loss which may result from the action by any person upon such information. Such information is subject to change without notice and is not intended as a recommendation, offer, or solicitation with the respect to the purchase or sale of any security.