CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
February 20, 2018
Consumer and producer prices for Jan were higher than expected, resulting in bear flattening of the Treasury curve and a weaker dollar. CPI for Jan, which was released Wed, increased 0.5% vs consensus of 0.3%, while PPI rose 0.4%, higher than the consensus 0.2%. Treasury yields through 5yrs moved higher (9-13 bps) in response to the inflationary data, although...
The Muni market remains awash in secondary supply, particularly of intermediate and long bonds, as accounts attempt to reposition portfolios for a higher rate environment by selling bonds 10yrs and out. Dealer inventories also remain elevated at over $22 bil., or 20% above-average. Munis inside 5yrs are between 8 and 27 ratios rich to 3yr averages although remain well-bid due to...
Fortunately for the Muni market, gross supply YTD is only $29.8 bil., or -40% vs last year at this time ($50 bil.). Issuance last week was only $4.1 bil. and was well received, in particular the $1.5 bil. PA Tobacco / Sales tax transaction that received $25 bil. of orders. This offering was all about yield and...
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SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 4th QUARTER 2017
Please find attached Ramirez & Co.’s Quarterly Macroeconomic Outlook. In our report, we continue to monitor the US economy, global events and the Fed’s outlook on the economy and rates:
- 4Q17 GDP growth is initially reported at 2.6%, making the advance number for 2017 GDP growth 2.5%. US economic indicators generally surprise to the upside since October.
- The markets, primary dealers and Fed economists all move in lockstep regarding forecasts of the Fed Funds rate for 2018. In the longer run, the market still sees fewer rate hikes than the Fed.
- The yield curve continues to flatten, with 10Y and shorter term UST yields rising quickly while the 30Y remains largely flat. Fears of a recession due to yield curve flattening may be overstated as real rates remain negative, indicating an accommodative rate policy. Shorter term corporate spreads are the tightest since before the crisis, while longer term spreads are the tightest since 2010.
Members of our Financial Strategies Group, Niso Abuaf, Konstantin Semyonov and Duncan Sinclair, would be happy to discuss further any of the material with you.
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