CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
May 14, 2018
Municipals outperformed across the curve due to favorable valuations and weaker Treasuries. New issue supply last week was moderate and well received. Mutual funds had slight inflows on the week at $167 mil....
Treasuries were underpinned through Wed by lower than expected inflation in the UK, which prompted the BOE to make no change to interest rate policy. Thursday’s April CPI report indicated lower than expected consumer prices (+0.2% overall and +0.1% excluding food and energy), helping the US rates market to...
Gross new issue supply last week of $7.1 bil. was +15% above the 12 week moving average. Mutual fund flows were effectively a non-event at +$167 mil. on the week and are running at $2.83 bil. YTD. Secondary supply (BWICs) was slightly...
Supply this week is a 2018 high at over $10 bil., or 62% above the 12 week average of $6.2 bil., with 16 deals in excess of $100 mil., which means to us that the secondary will likely take a back seat to the primary. The negotiated space is led by...
The 2yr, 5yr, and 30yr spots maintain fair relative value vs the 12mo and 3yr averages, at 73%, 72%, and 95% respectively. Despite this fact and the more recent ramp-up of new issue supply, we think that Munis (at least through 5yrs) are more likely than not to...
This week has several Fed speakers, trade talks with China, Trump decides if he will be deposed by Mueller (Thurs), Middle East tensions. On the economic data front, we have...
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SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 1st QUARTER 2018
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:
- Threats of trade wars and actual wars rattle markets, with the S&P 500 and Dow Jones hovering around correction territory. Market stress indicators spike but then settle down at slightly heightened levels.
- The markets, primary dealers and Fed economists show small divergence regarding forecasts of the Fed Funds rate for 2018. Primary dealers generally see three remaining hikes, the markets two or possibly three hikes, and the Fed economists just about split on two or three hikes.
- The US Treasury yield curve flattens significantly since December 2015, as the Fed raises its target rate six times, but with little change in 30Y bond yields. Corporate spreads during this time also tighten to near pre-crisis levels. However, as turmoil hits the markets, longer-term rates decline slightly from recent highs and spreads widen slightly. In the long term, primary dealers forecast continued flattening.
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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