CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
March 19, 2018
Munis ended mixed and generally underperformed Treasuries (again) last week after inflation data for Feb, released Tuesday, was effectively in-line with consensus estimates and causing the Treasury curve to dramatically bull flatten. CPI and Core CPI rose +0.2% in Feb, matching consensus estimates and surpassing 2% YoY. PPI rose +0.2% vs estimates of +0.1% and retail sales were weak at -0.1%, missing the consensus estimate of +0.3%. The in-line inflation data propelled a strong 30Y Treasury auction, signaling that the long-end has fuel to flatten further. Stocks were down 1% as the bond market rallied, influenced by...
We’ve said it before, and will (reluctantly) say it again: Munis remain plagued by secondary market oversupply and lack of significant sponsorship beyond the 10yr part of the curve. Similar to the last few weeks, BWICs last week were +44% above average at $973 mil. daily and two days exceeding $1 bil., driven by...
The Senate voted (67-31) last week, as part of a broader banking bill, to include Munis as “level 2B” high-quality liquid assets (HQLA) towards a bank’s “liquidity coverage ratio, or LCR. Munis are not currently counted as HQLA towards the LQA. Should the House pass the Senate bill, or at least...
Gross supply YTD is down -25% YoY ($55.9 bil.) which is relatively in-line vs our full-year estimate of gross supply of -27% YoY ($317 bil.). Issuance last week was a relatively low $6.6 bil. and supply this week drops off a literal cliff (-52% on the week) to only $3.1 bil., led by seven medium-sized transactions under $270 mil., including four transactions in the negotiated space and three competitive. Negotiated transactions are led by...
This week is chock full of risk events, including a potential partial Fed Gov’t shutdown on Friday, the Fed meeting on Wed under new Fed chairman Jerome Powell and an expected 25 bps Fed Funds rate hike to 1.50% – 1.75% following the meeting, and the G-20 Finance Ministers meeting. The market will be looking for...
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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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