CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
November 13, 2018
Munis traded firm on the week and outperformed Treasuries by about 1 ratio inside 10yrs on light primary market volume ($3.6 bil.) as issuers paused for the US midterm elections and the FOMC meeting, both of which produced results in-line with expectations. Munis underperformed in 30yrs by 1 ratio, which now reads 100.7% as sponsorship for longer duration remains weak as banks and insurance companies, historical buyers of duration, continue to be better sellers. The new issue supply that did come to market, however, was...
This week’s gross supply totals $8.57 bil., led in the negotiated market is led by $600 mil. Michigan Strategic Fund, $587 mil. Prisma Health, $500 mil. Central Plains Energy, and $426 mil. LA DWP. Competitively, the largest deal is $311 mil. FL DoT. Gross supply YTD is $279.5 bil, or -14% YoY and we estimate another $40-$50 bil. of new issue supply through year-end, which would put gross supply YTD down by about -25% YoY, or between...
This week has various Treasury auctions, ***Oct CPI*** on Wed, retail sales, initial and continuing claims, Fed speakers...
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SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 2nd 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:
- Almost a decade after the onset of the Great Contraction of 2007 – 2009, the Fed deserves an “honorable mention” for achieving its dual mandate of full employment and price stability – the cries of naysayers notwithstanding.
- And now, the Fed is on to its next phase of gradually raising the federal funds rate to around 3% and passively contracting its balance sheet.
- Market participants who are bullish on the economy think that 10Y Treasuries will move up to a fair-value yield of 4% as the term premium rises, while forecasters who are bearish on the economy think that the 10Y yield will move around an anchor of 3%, possibly because of still expanding foreign Central Bank balance sheets and strong global demand for safe assets.
- Risks on the horizon entail rising US debt-to-GDP levels, financial market distress due to “trade wars” or “overpriced assets,” pressures on the short end of the yield curve primarily due to increased US Treasury funding needs and worries about a flat or an inverting yield curve signaling an impending recession.
- The question remains whether the Fed will be able to smoothly navigate around the risks mentioned above. Consensus is emerging that the Fed’s balance sheet will not contract as sharply as initially expected.
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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