CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
October 16, 2017
We Like Long Duration, Credit Down
Munis slightly under-performed Treasuries in the belly of the curve last week as Treasury 5s30s bull flattened 4bps to 90 bps. The last time Treasury 5s30s was ~90bps was almost ten years ago (Nov, 2007), right before the economy officially slipped into recession (see Chart below). With the economy now running on all cylinders and threat of recession low, investors are instead focused on...
Last week’s $8.8 bil. Muni calendar was very well received. The $2 bil. North Texas Tollway Auth (NTTA) transaction received $19 bil. of total orders, including $1.9 bil. during the retail order period. The S&P Main Muni index returned 35 bps on the week and has gained 470 bps YTD. The ‘A’ rated sector returned 37bps on the week and has returned 506 bps YTD. Muni technicals are generally...
The State of Illinois is selling $5.5 bil. of GO bonds to fund it’s backlog of payables over the next two weeks. This week the State is selling $1 bil. competitively and coming to market next week with $4.5 bil. in the negotiated space. The Illinois deals have helped vault the 30-day net supply number to positive territory...
We think there is opportunity for long-end out-performance as long as inflation remains soft. We also like buying longer maturity ‘A’ rated bonds (20-30yr) callable in 7-9 years and selling...
Full Weekly Report
SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 2nd 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:
- 1Q17 GDP growth settles at 1.4%. The Atlanta Fed’s GPDNow and Blue Chip consensus forecast about 2.7% GDP growth for 2Q17. Economic surprise indicators in the US slide into negative territory, bucking the markets’ optimism. In Europe, economic surprise indicators rise.
- The Fed hikes its benchmark rate another 25 bps in June, following similar hikes in March and December. The Fed, the markets, and major banks all agree: one more rate hike in 2017 is expected. Major banks see a flattening of the yield curve as they predict short-term rates rising faster than long-term rates.
- The drawdown: the Fed outlines a program to pare down its holdings of Treasuries and MBS. The latest FOMC minutes show that the draw-down could start as soon as this Fall.
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.
Full Quarterly Report