Citi's Rob Crowe on CP, Fed, Prime
Citi's Rob Crowe writes in his latest "Global CP Market Commentary," "The USCP market experienced increased volatility on the week, as Fed Chair Yellen posed a relatively hawkish position at her semiannual report to Congress. In her testimony, Yellen emphasized the view that the U.S. economy has made progress toward the Fed's dual-mandate objectives of maximum employment and price stability.... Prior to Yellen's testimony, Fed Fund futures priced a 30% probability of a March rate hike, increasing to 44% post Yellen's testimony, and settling at 34% on Friday.... The combination of Yellen's testimony as well as continued demand for floating-rate paper tightened floating-rate spreads in a few bps on the week. Tier-1 issuers were able to access size in 1-year at 1mL+40 bps. Tighter spreads were off-set by LIBOR drifting higher on the week across most tenors. 3-month LIBOR started the week at 1.04%, increasing to 1.06% Thursday, and settling at 1.05% on Friday. Unsecured bank bullets traded in size in 6-months a touch wider week-over-week." It adds, "Prime assets increased on the week to $390.5 billion (+$2.5 billion week-over-week; +$8.2 billon month-over-month). According to Crane Data, the yield spread between Prime and Government funds widened out by 2 bps month-over-month to 32 bps, with Prime and Government funds offering a net yield of 48 bps and 16 bps, respectively."
