Markets were mostly in risk off mode on the week as investors digested a litany of news and data, including dimming hopes for federal fiscal stimulus, economic data indicating an uneven recovery, mostly good Q3 corporate earnings, worsening Covid-19 numbers in the US and Europe, and the growing possibility of a “blue wave” in Nov. Equities ended mostly flat while Treasuries rallied across the curve, led by the 30yr bond yield which declined -5 bps to 1.52%. Treasury Sec. Mnuchin said reaching a fiscal stimulus deal before the Nov. 3 election will be difficult.
Tax-exempts posted small gains but lagged Treasuries on the week mostly due to an outsized new issue calendar of $18.3 bil., led by deals from Denver Airport, Kansas City Airport, and Baptist Healthcare. The calendar included $5.4 bil. of taxable, or 30% of the total. Fund inflows on the week were +$614 mil. and total +$13.4 bil. YTD. MMD was bumped -1 bps in 5yrs and out. Gross supply YTD is $381 bil, or +24.9% y/y driven by taxable issuance at +185% y/y.Full Weekly Report
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:
• The disruption from COVID-19 is set to cause the steepest fall in global GDP since WWII. The Fed projects -6.5% growth in 2020, followed by 5.0% 3.5% in 2021 and 2022 • The Fed projects an unemployment rate of 9.3% by the end of 2020 vs its December projection of 3.5%, and expects the unemployment rate to decline to 6.5%, 5.5%, and 4.1% respectively in 2021, 2022, and in the longer run
• The Fed funds rate remains unchanged at 0%-0.25%, and will remain there through 2022, according to the median FOMC estimate
• Broad based fiscal stimuli will likely reach 20% of GDP. About half of it will be monetized by the Fed
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