GE Capital

GE Capital

GE Capital
Current Dynamics
U.S. swap rates are higher so far in March following stock market gains and some favorable economic data outcomes.  Although rates fell in February amid a string of disappointing U.S. economic data releases, rate movement was choppy last month amid unfolding sovereign debt, monetary policy & global growth considerations. For 2010 so far, rates remain lower given concerns over the sustainability of economic recovery.  Investor demand for newly auctioned U.S. Treasury debt remains solid.                                                                                                 
  • On March 12, one, three and six-month U.S. Libor set at 0.23000%, 0.25719% and 0.39781% respectively.  According to the futures market, three-month Libor is expected to end 2010, 2011 and 2012 at 0.89%, 2.33% and 3.41% respectively.  One and three-month Libor are a respective 436 and 456 bps lower than their October 10 '08 crisis peak following government support to the financial system.  
  • On March 3, the Fed's Beige Book regional economic survey showed economic conditions continued to expand in January through mid-February.  The report said extreme winter weather negatively affected consumer spending, residential real estate and agricultural activity.  On February 24, Fed Chairman Ben Bernanke reiterated the fed funds rate would likely remain exceptionally low for an extended period but that the Fed will at some point need to tighten monetary conditions to prevent the development of inflationary pressures.
  • Recent U.S. data releases showed that in February, retail sales increased 0.3%, more jobs were lost, the unemployment rate held steady at 9.7% and consumer confidence fell sharply.  In January, the CPI rose 0.2%, capacity utilization increased for a seventh straight month, new home sales fell 11.2% and existing homes sales fell 7.2%.  In Q4, real GDP increased at a 5.9% annual rate, the most in about 6 years as increased production significantly slowed the pace of inventory reductions.  In December, business inventories declined further. 
  • U.S. Treasury debt issuance is increasing substantially.  Fiscal '09, which ended September 30, had a record U.S. federal budget deficit of $1.42 trillion, or 10% of GDP - the largest since 1945.  On February 1, the President's new fiscal '11 budget proposal estimated a record $1.6 tn fiscal '10 budget deficit followed by a $1.3 tn deficit in fiscal '11.
Fed Policy - January 15
The Federal Reserve continues to use traditional and nontraditional tools to counter the strains from reduced credit formation, unemployment and economic uncertainty, however, policy makers are confronting new challenges as the economy emerges from recession and imbalances grow.
U.S. LIBOR's Path - August 18
Libor has fallen to record low levels as the Federal Reserve's accommodative policies have successfully impacted the money markets.  One and three-month Libor are expected to begin increasing later this year.  
U.S. Forecast - July 23
Consensus forecasts anticipate U.S. economic growth gradually improving over the next 3 quarters.