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Documente Profesional
Documente Cultură
0.34
Historical Yields
Treasury (2 Year)
Anticipating a busy week of economic announcements, the markets were relatively quiet on Monday. Looking ahead, the FOMC announcement on Wednesday and monthly jobs report are expected to be the main drivers this week. The 10-year Treasury yield ended the week up four basis points to 2.60%. The consumer confidence report was released on Tuesday, which showed a slight decline from the last report and was shy of what speculators were hoping to see. That said, readings on overall July conditions are quite positive. The markets reaction remained reserved for the release of Wednesdays FOMC statement. The 10-Year Treasury gained another point on Tuesday to close at 2.61%. With Wednesday came the anticipated FOMC meeting announcement. Overall, the changes were very limited as compared to the prior statement issued by the FOMC. There was no reduction in quantitative easing, but the door was left open. The Fed funds target rate remained unchanged, holding between 0 and 0.25%. The characterization of the economy was downgraded with a change in verbiage used to describe the expansion of economic activity choosing to characterize it as modest as opposed to the previously used moderate. The labor market remains a focus as we have seen slight improvement, yet unemployment remains high. Along with this report, we also got GDP results for Q2 2013, which beat expectations. The annualized GDP came in at 1.7%, which beat the 1.1% rise we saw in Q1 and 1.1%projection for the second quarter. Wednesday closed with the 10-year Treasury yield giving back three points to close at 2.58%. As has been the case in recent weeks following big Wednesday announcements from the Fed, the reaction was felt on Thursday. With an economy that seems to continue fortifying and the Fed keeping stimulus flow in place, it seems to be the best of both worlds. A very strong day started out with great results in ISMs manufacturing sample report, which was up 4.5 points to 55.5; 2.3 points over what was anticipated, which resulted in the strongest reading in more than two years. The 10year Treasury yield climbed 13 basis points to close at 2.71%. The week ended packed with economic announcements led by the highly anticipated nonfarm payroll report and personal income report being released on Friday morning. Nonfarm payroll came in less than expected at a 162,000 increase in total payroll jobs as compared to the projected 175,000. Net revisions from May and June were down 26,000. The unemployment rate dropped to 7.4% from 7.6% the prior month and 0.1% lower than the projection of 7.5%. Personal income and spending was also reported on Friday with personal income growth numbers from June coming in slightly below forecasts of 0.4% at 0.3%. Consumer spending was up 0.5% led by nondurables (mainly gasoline) with durables contributing as well thanks to auto sales. The 10-year Treasury remitted most of Thursdays gains, closing the week at 2.60%. The two-year Treasury yield closed at 0.30%, a one basis point decrease from last week. The 10year Treasury yield gained four basis points to 2.60%. The 30-year Treasury yield dropped eight basis points to close the week at 3.63%.
Percent
7/30/13
7/31/13
8/1/13
8/2/13
Treasury Curve
4 3
Percent
5.0
10.0
Current
Source: Bloomberg, Piper Jaffray
1 month ago
1 year ago
500 400
Spread
Treasury Spread
-100 Jan-06
Jan-09
Jan-11
Jan-13
Economic Calendar
Monday, July 29
Last Revised Survey Pending Home Sales MoM 6.70% -1.00% Pending Home Sales YoY 12.50% 8.30% Dallas Fed Manf. Activity 6.5 7.5 Actual -0.40% 9.10% 4.4
Tuesday, July 30
Wednesday, July 31
Actual -3.70% 200k 0.50% 0.70%
Thursday, August 01
Last Revised Survey Actual Initial Jobless Claims 343k 345k 326k Continuing Claims 2997k 2996k 2951k Bloomberg Consumer Comfort -27.30 -27.00 Domestic Vehicle Sales 12.43M 12.40M 12.09M
Friday, August 02
Last Revised Survey Unemployment Rate 7.60% 7.50% Personal Income 0.50% 0.40% Personal Spending 0.30% 0.50% Factory Orders 2.1% 2.3% Actual 7.40% 0.30% 0.50% 1.5%
Last Revised Survey Actual Last Revised Survey S&P/CS 20 City MoM SA MBA Mortgage Applications 1.72% 1.40% 1.05% -1.20% S&P/CS Composite-20 YoY ADP Employment Change 12.05% 12.40% 12.17% 188k 180k S&P/CaseShiller Home Price Index NSA Employment Cost Index 152.37 156.14 0.40% 0.30% Consumer Confidence Index GDP Price Index 81.4 81.3 80.3 1.00% 1.20%
Monday, August 05
Last Revised Survey ISM Non-Manf. Composite 52.2 53.1 Actual
Tuesday, August 06
Last Revised Survey Actual Trade Balance -$45.0B -$43.2B IBD/TIPP Economic Optimism 47.1 47.5 JOLTs Job Openings 3828 3895
Wednesday, August 07
Last Revised Survey Actual MBA Mortgage Applications -3.70% Consumer Credit $19.615B $15.000B
Thursday, August 08
Last Revised Survey Actual Initial Jobless Claims 326k 336k Continuing Claims 2951k 2950k Bloomberg Consumer Comfort -27.00 Mortgage Delinquencies 7.25%
Friday, August 09
Last Revised Survey Actual Wholesale Inventories MoM -0.50% 0.40% Wholesale Trade Sales MoM 1.60% 0.70%
August 3, 2013
This material is a product of the Fixed Income Services trading desk and should not be construed as impartial research or a research report.
4 3 2 1 0 0 5
10 LIBOR
15
20
25
30
10
15
20
30
0.05 Nov-12 Dec-12 Feb-13 Jan-13 Mar-13 Jun-13 Sep-12 Apr-13 Jul-13 360
0 0.00 0.20 0.40 0.60 0.80 1.00 1.20 Years Libor Curve
Source: Bloomberg, Piper Jaffray
0.5 0 Q1 12
0.1
Q2 12
Q3 12
Q4 12
Q1 13 0 0 90 T- bill
Source: Bloomberg, Piper Jaffray
High Forecast
Low Forecast
Median
August 3, 2013
Monday we witnessed a nice move tighter as dealers covered their shorts. Unfortunately, on Thursday we gave up that tightening as treasuries were for sale. There was very little liquidity outside of 7 years. 10 years+ bullets are difficult to move even after the tightening of the 1/22s during July (wide print +35, currently +17 bid). Callable issuance was very lite again. ~12 billion in callables printed in July, which was the smallest amount since October 2008 when the GSEs went into conservatorship. Accounts have become just as risk adverse as dealers.
Yield (%)
Right back to where we started. Agency market was a touch more volatile last week as everyone prepared for the jobs number. However, bullets are looking almost unchanged on the week.
0 0
-2
10
15
20
25
30
On-the-run Treasury
Discounted paper from 17 to 20 has a nicely framed market: ~pick 15-20 basis points over bullets.
4
Swap Curve
0.6
Futures Rates
3
0.5
0.4 0.3
0.1 0
Mar-13 Jun-13 Oct-13 Jan-14 Apr-14 Jul-14 Nov-14
Percent
Fed Fund Futures Eurodollar Futures
0.2
0.75
0
0.5
0.1
2.0
7.0 Years
Current 1 month ago
12.0
40.0
0 1 month
1 year ago
6 month Libor
1 year
August 3, 2013
Yield (%)
Yield (%)
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12 Dec-12
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Dec-12
15 Year FNMA
Source: Bloomberg, Piper Jaffray
Treasury 5 Year
Source: Bloomberg, Piper Jaffray
30 Year FNMA
Treasury 10 Year
15 Year FNMA
Coupon Price PSA Yield Average Life Spread 2.5 99-28 160 2.505 5.72 89 3 3.5 4 102-25 104-25 105-29 205 246 256 2.395 2.408 2.633 5.29 4.95 4.90 92 104 129 4.5 106-11 256 3.022 4.93 166 Coupon Price PSA Yield Average Life Spread
30 Year FNMA
3 96-28 125 3.406 9.65 80 3.5 4 100-25 103-30 151 200 3.381 3.349 8.82 7.51 96 121 4.5 106-2 278 3.297 6.02 158 5 107-28 385 3.093 4.75 180
Fridays unemployment number was not enough to push municipals as participants stayed on the sidelines and waited for this weeks calendar.
Supply was manageable at just under $5 Billion but further municipal fund outflows continue to make investors cautious. The municipal market will have a bigger test this week with a calendar approaching $6.6 Billion. While the negotiated market has a number of different credits in the market, the competitive side has 3 large GO deals that will test the benchmark curve. Minnesota will have $465mm on Tuesday, with $800mm Washingtons and $138mm Alabamas following on Wednesday. On the plus side, we have seen crossover buyers enter the market as ratios to Treasuries have remained at attractive levels.
Yield (%)
3
2 1
Municipal Underwritings
Par (000s) 1,425 1,976 5,277 9,560 55,555 31,000 Issuer Piper Municipal Underwritings CA College of Sequoias Tulare Dist No. 3 GO 08 Elec 13C CA College of Sequoias Tulare Dist No. 3 GO 08 Elec 13C Conv CAB CA College of Sequoias Tulare Dist No. 3 GO BANs 13 ID Sch Dist #281 Moscow GO 2013B Tax-Exempt KS DFA Rev-Wichita State Univ Student Hsng 2013F-1 OR Klamath County Sch Dist GO 2013 Negotiated Calendar CA Yosemite Unified Sch Dist COP 13 TX Austin ISD Unltd Tax Refunding 13 CA King City Union Sch Dist 2013-2014 TRAN MO Central Cass County Fire Protect Dist GO 13 CO Red Sky Ranch Metro Dist Eagle Cty GO Ref Focus Competitive Deals St Louis County GO 13A Cap Improvement MN GO State Trunk Highway 13B Schertz-Cibolo Unlimited Tax School GO Westborough GO Muni Purp Loan State CA CA CA ID KS OR Piper Role Sr.Mgr Sr.Mgr Sr.Mgr Sr.Mgr Sr.Mgr Sr.Mgr Deal Type Sole Sole Sole Sole Sole Sole N/C Negotiated Negotiated Negotiated Negotiated Competetive Negotiated Pricing Date 8/1 8/1 8/1 8/1 8/1 8/2
0 1 6
Current
Source: Thomson Municipal Market Monitor
11
Years
16
1 Month Ago
21
1 Year Ago
26
Yield (%)
CA TX CA MO CO
Sr.Mgr Sole Co-Mgr Syndicate Sr.Mgr Sole Sr.Mgr Sole Co-Snr Syndicate
MN MN MN MN
6
AAA GO
11
16 Years AA GO
21
A GO
26
BAA GO
16.00 14.00
$US Billions 12.00
10.00
8.00 6.00
4.00
2.00
0.00 8/2/2013
Source: Piper Jaffray
Source: Thomson Municipal Market Monitor
8/2/2012
30-Day Avg
2012 Low
2012 High
250
AAA GO Vs Treasury
Treasury Treas Maturity (years) Yield
200
150 100
1 2 3 5 10 15 20 30
50
0 Jan-06
8 13 14 -5 10 40 52 53
14 21 24 12 35 69 81 83
Basis Point
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Source: Thomson Municipal Market Monitor
5 Year
Source: Thomson Municipal Market Monitor
10 year
30 Year
August 3, 2013
CDX Vs VIX
70 50 30 10 -10 -30 -50 Dec-11 Jun-12 Dec-12 Jun-13 VIX VIX Jul-13
It was a somewhat quiet week overall in credit especially Thursday with the pending economic number. IG opened Monday at 76 and closed at 72.
170 150
Trace volumes were average to on the low side last week. In the 7-12 year range, the most active sectors continue to be finance and energy. Names include Goldman Sachs Group Inc., Bank of America Corp., Morgan Stanley, General Electric Co. and JPMorgan Chase & Co. On the shorter side, bonds and yield are still somewhat hard to come by. Clients are willing to exchange ratings for yield more often it seems.
The new issue market was busy. Names include Kinder Morgan, Halliburton Co., Icahn Enterprises, Huntington, WellPoint Inc., Celgene Corp, Credit Suisse Group AG, Standard Pac Corp. to name a few.
CDX
CDX
VIX Index
85
30 80 CDX 25
20
75 15 10 70 5 65 5-Jul-13 0
15-Jul-13
25-Jul-13
CDX
VIX Index
BAC
140
130 120 110 100 90 80 Jan-13 Mar-13 Aug-12 Sep-12 Feb-13
GS
CISCO
WMT
110
105 100 95 90 Aug-12 Apr-13 May-13 Sep-12 Nov-12 Dec-12 Feb-13 Jun-13 Oct-12
Apr-13
Jun-13
Oct-12
May-13
Nov-12
Dec-12
Jul-13
May-13 May-13
Dec-12
Jan-13
Mar-13
Aug-12
Nov-12
Sep-12
Feb-13
Apr-13
Mar-13
May-13
Aug-12
Sep-12
Feb-13
Apr-13
Dec-12
Jan-13
Mar-13
JPM
GE
140
130 120 110 100
Nov-12
Oct-12
Pfizer
Jun-13
Oct-12
140
130 120 110 100
AT & T
Sep-12
Nov-12
Feb-13 Mar-13
Apr-13
May-13
Oct-12
Dec-12
Jan-13
Jan-13
Mar-13
Aug-12
May-13
Sep-12
Nov-12
Feb-13
Dec-12
Apr-13
Jun-13
Jul-13
Jun-13
Jul-13
Oct-12
Jan-13
Mar-13
Aug-12
Sep-12
Nov-12
Feb-13
Sep-12
Nov-12
Feb-13
Apr-13
Jun-13
Jul-13
Dec-12
Dec-12
August 3, 2013
Jul-13
Jun-13
Jan-13
Jul-13
Jul-13
Price movements in the $1000 par market were more security specific than unusual. On average, we believe that the more liquid issues were down 5/8 point. However, the range of price movements for specific securities was anywhere from down 1.25 points to up 1.25 points. As July came to an end, new issuance totaled $44.01 billion across $25 and $1000 par securities. Net new issuance for the year to date is only $2 billion. We expect net new issuance to grow more rapidly over the remainder of the year as we expect redemptions to ebb. Year to date, $25 par issuance has been $22.14 billion, only slightly higher than the $1000 par level of $21.87 billion.
Given the slowdown in issuance since May, we revise our 2013 primary market projection to be $76 billion, which is a reduction of 15% from our earlier estimate of $90 billion. Noteworthy in the news this past week were the earnings announcements from the European banks. Among the eye catching announcements were the news items from Lloyds and Barclays. In Barclays case, they announced they are looking to raise GBP 5.8 billion in ordinary shares. We always view the addition of common equity as a positive for preferred/Tier 1 holders. In Lloyds case, improved earnings and the communication of their discussion to potentially restore ordinary dividends in the near term cheered investors in most U.K. banks. As the week closed, we became focused on the announcements from RBS. We view their 2Q earnings much the same as we have viewed RBS earnings over the past one or two years: two steps forward, one step back. However, the market response to their news was neutral. We believe that market participants in RBS preferred/capital securities have been focused on the potential for problems arising if the government were to ever adopt a good-bank/bad-bank solution. We believe that such an outcome is a low probability event. However, we expect it to cast a shadow on the market until the fall. On Fridays fixed income call, the following points relevant to this topic were made: RBS management noted the whole reason for the Rothschild/Blackrock study is to facilitate privatization. RBS said that it is their view that anything that causes a credit event (such as a write -down of securities) will not facilitate a privatization. They state that HMT (HER Majestys Treasury) shared this view. RBS management noted that they have studied the good bank/bad bank option at length in the past. They could not achieve a workable solution using such a mechanism and prepared the bank for privatization. Management also described the process of the Rothschild/Blackrock study as one that is interactive and consultative with RBS management. Finally, they noted it was their understanding that any dramatic changes to the RBS structure would most likely still have to be voted upon by the minority (public) shareholders.
8/1/13
7/29/13
7/30/13
85 Jan-11 Mar-11 Jan-12 Mar-12 Jan-13 May-10 May-11 May-12 Mar-13 May-13 Jul-10 Sep-10 Nov-10 Jul-11 Sep-11 Nov-11 Sep-12 Nov-12 Jul-13
Jul-12
7/31/13
August 3, 2013
8/2/13
Dec-12 Dec-12 Jan-13 Jan-13 Jan-13 Feb-13 Feb-13 Mar-13 Mar-13 Mar-13 Mar-13 Apr-13 Apr-13 Apr-13 May-13 May-13 May-13 Jun-13 Jun-13 Jun-13 Jul-13 Jul-13 Jul-13
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