CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
May 13, 2019
Muni Weekly Recap. Munis rallied on the week and outperformed Treasuries as tax-sheltering investors continue to support the market despite record high valuations. Fund flows were again positive for the 18th consecutive week at $1.5 bil. (YTD record of $21.6 bil.), while new issue supply of $6.9 bil. was unsurprisingly well-subscribed. New issuance was led by PA Fin Auth, TX Bd of Regents, Energy NW, Miami Airport, Mass GO, and LA USD. Secondary market flow is on the decline as investors reprise Pac-Man, gobbling up (almost) everything in sight. Last week’s BWIC par offered was 74% vs 1yr avg and dealer inventories are running at -22% below 5yr avg.
Last week’s markets were dominated by the markedly sharp reversal in US trade policy towards China. The week began with Trump’s tweets threatening to impose 25% tariffs (from 10%) on $200 bil. of Chinese goods by Friday (which occurred), followed by on-and-off-again hope during the week and finally, despair over a potential trade deal. Equities were volatile during the week as negotiations between the US and China progressed with the VIX spiking to ~20 on Thurs. All major US equity indices were down over -2% for the week, despite staging a late day rally Friday after Munchkin and Trump indicated a constructive tone to end the week. Rates markets globally benefitted from...
This week. This week is starting off with a bang on retaliatory tariffs from China (25% on $60 bil.) on US imports, with very slow to non-existing secondary activity as rates stage an impressive rally and equities experience a broad sell-off. If the sentiment continues, the most significant activity this week will be the primary market, which of course should do well. While the focus will continue to be on US-China trade, other headline events include Brexit, retail sales, TIC Flows, housing starts, initial and continuing claims, U. of Mich. Sentiment, Fed speakers, and...
Full Weekly Report
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.
Full Quarterly Report