Thirty Capital Market Update: Impact of Geopolitical Events on Rate Hikes

To recap the Thirty Capital Monday Morning Market Call: The focus this morning was on recent market trends. It was noted that the conflict between Hamas and Israel has had a significant impact on the markets. After the initial attacks on Israel, investors sought safety in treasuries. As a result, the 2- and 10-year swaps saw drops of about 11 and 15 basis points, respectively.

Despite some volatility in the 10-year treasuries, it was noted that the flight to safety played a significant role in keeping rates lower than they might have been otherwise. The week also saw stronger than anticipated CPI (Consumer Price Index) numbers, which reversed some of the earlier gains in the short end. Despite this, the market remained extremely volatile.

Looking ahead to the coming week, there are key data points to watch, including retail sales on Tuesday, housing starts on Wednesday, and the Philly Fed report on Friday.

In the swaps market, it was observed that SOFR (Secured Overnight Financing Rate) remains at 53 basis points for the one-month term, indicating low expectations of any Fed action at the next meeting in November.

Other macroeconomic factors that exist are looming concerns over a government shutdown, fluctuations in oil prices, and uncertainties related to the global economic dynamics, particularly due to a lack of clear congressional leadership.

Overall, while there were fluctuations in rates and uncertainties in the market, the impact of geopolitical events, such as the Middle East conflict, will play a large role in pausing rate hikes and furthering the notion that rates will remain at elevated levels for the foreseeable future.


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