CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
June 17, 2019
Muni Recap. Munis fell slightly and underperformed Treasuries on the week as low absolute yields and stretched valuations weighed on prices despite continued strong fund inflows and reinvestment activity. Treasuries rallied mostly on anticipation of central bank rate cuts this year amidst weaker economic data and geopolitical tensions in the Persian Gulf. M/T ratios were weaker across the curve by an average of +2.29 ratios, most notably in the 2yr spot, which underperformed by +0.84 ratio to end at 70.4% (“cheap” on a 1yr basis / “fair” on a 3yr basis) and the 10yr spot which underperformed by +3.56 ratios to...
Market Recap. Last week’s markets were driven by market expectations for Fed and ECB rate cuts in 2019 on slowing growth and low inflation, continued trade US trade tensions with Mexico and China, Iran tensions in the Mideast, and slowing economic growth in China. Treasuries weakened on Monday after Trump’s Mexico tariffs were tabled on Mexico’s moves to halt immigration to the US, but posted a small rally for the remainder of the week on market expectations that the Fed and ECB will cut rates by year-end due to weaker inflation and slowing global growth (vs Trump’s Fed-bashing). Core CPI for May was up +0.1% for the...
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SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 1st QUARTER 2019
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:
- In 2018, with accommodative fiscal and monetary policies, and strong global growth, US real GDP grew at about 3% – somewhat above the economy’s longer-run growth potential, which the Fed estimates to be a bit below 2%.
- The FOMC begins to take a more judicious stance towards the future path of monetary policy – in light of the cumulative 225 bps tightening, 100 bps of which occurred in 2018.
- FOMC participants estimate that the neutral longer-run federal funds rate is in the 2.5%-3.5% range, whose lower bound is near the current rate.
- As the FOMC becomes more uncertain about the tightening effects of the balance sheet roll down, it begins to pay more attention to the maturity structure of the portfolio and the balance of Treasuries vs. mortgage-backed securities.
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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