H2C INDUSTRY INSIGHTS: CAPITAL MARKETS
Interest Rates and Economy
Week of November 20, 2023
Interest Rates & Economy
Interest Rate Update (1)
The Federal Open Market Committee maintained its Federal Funds target rate of 5.25% - 5.50% at its November meeting. The CME Group is pricing in no policy changes at the December meeting, although another hike is not off the table(2).
The 2-yr U.S. Treasury note (UST) decreased 31 bps month-over-month (MoM) to 4.88%. The 10-yr and 30-yr UST fell 39 bps and 35 bps MoM to 4.44% and 4.59%.
The 2-yr MMD rate decreased 48 bps MoM to 3.14%. The mid- and long-end of the MMD yield curve have also fallen with 10-yr and 30-yr MMD at 3.01% and 4.07%.
Overnight SOFR remained stable MoM at 5.32% while 1-Month Term SOFR is 5.33%, remaining near the highpoint since its inception(3).
SIFMA rose to 3.81% after initially falling for three consecutive weeks in early October. Daily Mode VRDN rates fell 78 bps MoM to 3.29%.
Economic and Financial Update
Inflation as measured by the Consumer Price Index (“CPI”) was unchanged in October for the first time since July 2022, resulting in the lowest annual rise in inflation in two years at 3.2%. The news alleviate some of the pressures on the Federal Reserve in raising interest rates in the near future(4).
The healthcare sector added 58,000 jobs in October, in line with the prior twelve months’ average. Ambulatory health care services saw the most job growth, adding 32,000 in the month, followed by hospitals which added 18,000 jobs(4).
Following the review of consultation feedback, Bloomberg announced the future permanent cessation of all tenors of the BSBY Index. It will take effect next year on November 15, 2024. Common replacement benchmark language cite, among other benchmarks, SOFR. SOFR has historically priced within a couple basis point of BSBY. However, it has priced 5 bps lower on average over the last six months(5).
Variance: 1-Month Term SOFR vs. 1-Month Term BSBY(1)
Wall Street Forecast (1)
Rates and ranges as of November 17, 2023
Source: CME Group’s FedWatch Tool as of November 17, 2023
Note: Since Overnight SOFR began publication April 2, 2018 and 1-Month Term SOFR data since January 3, 2019
Source: U.S. Bureau of Labor Statistics; Reuters
Source: Bloomberg “Future Cessation of the Bloomberg Short-Term Bank Yield Index ‘BSBY’” released November 15, 2023
Additional sources: Bloomberg, Refinitiv/TM3
Key Rate Updates
Source: U.S. Department of the Treasury, Bond Buyer, Investment Company Institute, Bloomberg and Refinitiv/TM3. Data as of November 17, 2023.
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.
About H2C Securities Inc. ("H2C")
H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations, higher education institutions, and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare and higher education mergers and acquisitions, capital markets, and real estate transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.
Securities and services offered through H2C Securities Inc., member FINRA/SIPC, a registered broker-dealer and an indirect subsidiary of Fifth Third Bank, National Association. All rights reserved. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit.
H2C Capital Markets Team
Managing Director 404.937.1340
William B. Hanlon III