- Rates: Treasury yields and SOFR swap rates surged sharply this week following the Fed’s 25 bps rate hike to 3.75%-4.00%, its first since 2023, with Treasuries rising more than swaps across the curve. Short-dated treasury yields and swap rates moved most in tandem with the new policy rate, while the sharper rise in intermediate Treasuries points to markets also digesting a hawkish dot plot signaling further hikes ahead. The smaller move in swaps compared to Treasuries suggests funding markets had already priced in much of the hike, while cash Treasuries adjusted more to the updated rate path and term premium.
- Fed Raises Interest Rates: On Wednesday, the Fed’s policymakers unanimously supported an increase to the benchmark interest rate. The Federal Reserve also signaled that an additional rate hike could come before the end of the year. The decision comes despite countless demands from President Trump to lower interest rates. The move comes after a more than 75% surge in the price of oil this year, thus raising gas prices and pushing inflation to 3.4% as of August.
- Truist Exits $5.5b Near-Prime Auto Lending Business: Truist is selling the entire business, including a $5.5b loan portfolio that makes up nearly all of the assets of its subsidiary, Regional Acceptance Corporation (RAC). The transaction is expected to generate $5.2b in proceeds, a $535mm loan loss reserve recapture, and $945mm in CET1 capital. CFO Mike Maguire said new CEO Mike Lyons has added urgency to focus on “fewer things that leverage our strengths,” noting RAC was “typically a loan-only, loan-first national business” with limited relationship depth beyond single transactions.
- Clarity Act Blocked in 50-49 Vote: The Senate voted Tuesday to block what would have been the first regulatory framework for cryptocurrency in the U.S. from advancing after months of negotiations. The vote highlights battles over ethics provisions and banking industry opposition to stablecoin interest-like payments that could trigger deposit flight.
Rate Curves
