US Federal Reserve hikes Interest rates for first time in 2018
OREANDA-NEWS. The Federal Reserve on Wednesday raised its key interest rate from 1.5% to 1.75%, the first of three expected rate hikes in 2018, citing an improving economic outlook. The Fed continued to project three rate hikes this year but forecasts a steeper path of hikes in 2019 and 2020.
While the official forecast remains at three rate hikes this year, the 15 Fed board members were divided over the outlook for the benchmark interest rate in 2018. Seven board members projected at least four quarter-point hikes this year while eight expected three or fewer hikes this year.
In the forecasts, the board members also projected a median federal funds rate of 2.9% by the end of 2019, implying three rate increases next year, compared with only two 2019 moves seen in the last round of forecasts in December 2017.
Markets rose after the Fed announcement, but flattened by Wednesday's close, with the DJIA and the S&P 500 both down 0.18%.
SGX lists 6 ETFs tracking the US market. Of these 6 ETFs, 2 of the ETFs track the S&P 500 index, including the DB X-TRACKERS S&P 500 UCITS ETF and the SPDR® S&P 500® ETF. SGX also lists the DB X-TRACKERS S&P 500 INVERSE DAILY (-1X), an inverse product.
On 22 March Thursday, upon the interest rate announcements, the SPDR® S&P 500® ETF closed down -0.55%, while the DB X-trackers S&P 500 Inverse Daily (-1X) closed up +0.33%. Tabled below are the details of the ETFs:
Name |
Stock Code |
Total Return MTD % |
Total Return YTD % |
Total return 12M % |
Inverse ETF |
||||
db x-trackers S&P 500 INVERSE DAILY (-1X) |
HD6 |
1.02 |
(2.53) |
-19.46 |
Long ETFs |
||||
Lyxor ETF Dow Jones Industrial Average |
JC6 |
-3.72 |
-2.05 |
14.24 |
SPDR® Dow Jones Industrial Average ETF |
D07 |
-3.71 |
-2.4 |
14.48 |
SPDRs® S&P 500® ETF |
S27 |
-2.24 |
-0.9 |
10.12 |
db x-trackers S&P 500 UCITS ETF |
K6K |
-2.28 |
-0.71 |
10.01 |
db x-trackers MSCI USA Index UCITS ETF |
KF8 |
-2.15 |
-0.52 |
10.34 |
Lyxor ETF Nasdaq-100 |
H1Q |
-2 |
4.17 |
20.22 |
Average (Long ETFs) |
-2.7 |
-0.4 |
13.2 |
Source: Bloomberg as of 22 March 2018
Investors who want to gain leveraged exposure to the US market may do so via the S&P 500 warrants listed on SGX. Tabled below are the details of the S&P 500 warrants:
Name |
Stock Code |
Call/ Put |
Expiry Date |
Strike Level |
S&P 2800MBeCW180618 |
CMEW |
C |
18-June-18 |
2800 |
S&P 2400MBePW180618 |
CMFW |
P |
18-June-18 |
2400 |
Source: SGX
China’s Central Bank Raises Borrowing Costs after the Fed’s Rate Hike
Following the Fed’s interest rate hike, the People’s Bank of China raised interest rates on Thursday on 7-day reverse repurchase agreements, used for open market operations by 5 basis points. The move increases the cost of short-term loans to commercial lenders to help China stay in step with the Fed’s tightening.
Among the most active HSI warrants, Hang Seng Call Warrant (CQZW) was down -19.4% on Thursday while Hang Seng Put Warrant (CRKW) was up +12.5% based on the last bid price at 4pm (HKEx market close).
For the Daily Leverage Certificates (DLCs) on the HSI, the 7x Long HSI DLC (CPRW) was down -8.1% on Thursday while the 7x Short HSI DLC (CPSW) was up +7.1% based on the data published by Societe Generale.
Tabled below are the details of some of the actively traded Hang Seng Warrants and DLCs on Thursday:
HSI Warrants - Most Actives
Name |
Stock Code |
Call/Put |
Expiry Date |
Strike Level |
HSI 30800 MB ePW 180427 |
CRKW |
P |
27-Apr-18 |
30,800 |
HSI 29800 MB ePW 180427 |
CRAW |
P |
27-Apr-18 |
29,800 |
HSI 32600 MB eCW 180427 |
CQZW |
C |
27-Apr-18 |
32,600 |
HSI 28800 MB ePW 180427 |
CQWW |
P |
27-Apr-18 |
28,800 |
HSI 31600 MB eCW 180427 |
CQUW |
C |
27-Apr-18 |
31,600 |
Source: SGX
HSI and HSCEI DLCs - Most Actives
Stock Code |
Counter Name |
Underlying Index |
Type |
Leverage |
Issuer |
Airbag Level |
CPRW |
DLC SG7xLongHSI 210114 |
HSI |
Long |
7x |
SG |
-10% |
CPSW |
DLC SG7xShortHSI 210114 |
HSI |
Short |
-7x |
SG |
10% |
CPTW |
DLC SG7xLongHSC 210114 |
HSCEI |
Long |
7x |
SG |
-10% |
CPUW |
DLC SG7xShortHSC 210114 |
HSCEI |
Short |
-7x |
SG |
10% |
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