CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
June 10, 2019
Muni Recap. Munis gained on the week and handily outperformed Treasuries due to continued overwhelming demand for the tax-exempt product amidst a relatively firm Treasury market. Muni outperformance averaged -3.80 ratios across the MMD curve and was in stark contrast to the prior week when tax-exempts underperformed Treasuries by +5.80 ratios (avg) due to plunging Treasury yields caused by Trump’s Mexico tariff threat (largely resolved). The most dramatic outperformance was in the 2yr and 5yr spots, which ended last week richer by -4.70 and -4.56 ratios at 69.6% and 70.7%, respectively. The 10yr and 30yr spots, while outperforming to a lesser degree (-2.93 and -3.02 ratios, respectively) turned “rich” on both a 1yr and 3yr basis at 75.2% and 87.6%, respectively. The MMD scale was bumped across the curve by an average of -4.71 bps, including -7 bps in 1yr through 5yrs (1.35%), -4 bps in 10yrs (1.61%) and -2 bps in 30yrs (2.30%) causing all curve spreads to bull steepen vs Treasury curves which bear steepened. SIFMA was bumped +2 bps to 1.40%, or 101% of 1yr MMD and 58% of 1mL. The S&P Main Muni index returned +20 bps on the week, +135 bps in May, and +471 bps YTD. Long-intermediate duration led Muni returns at +23 bps on the week (+505 bps YTD). New issuance of $7.8 bil. was +24% higher than the 12wk average and was...
Market Recap. Last week’s markets were driven by weak jobs reports, dovish ECB and Fed comments, and trade tensions. Treasuries were relatively firm for most of the week until Friday when yields began to rise after the May employment report broadly missed estimates at 75,000 new jobs (vs 175k expected). The March and April employment figures were also revised down and the unemployment rate held steady at 3.6%. The 10yr Treasury yield fell as low as...
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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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