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By Michael J. Bazdarich, PhD
The US foreign trade deficit on merchandise swung to the downside—that is, to a larger deficit—in October, as exports declined and imports rose. These trade swings reflect the unwinding of two trends.
By Thea Okin
Municipals continued to rally as they outperformed Treasuries in short and intermediate maturities. This week we highlight a rare General Obligation (GO) bankruptcy filing in the Commonwealth of Pennsylvania.
December 02, 2022
ECONOMY
By Michael J. Bazdarich, PhD
This was a pretty mixed bag of a report, but a distinct disappointment to markets, which were looking for enough slowing in job growth and wages to reassure themselves of a downshifting Fed.
By Joseph Genco, Sam Weitzman
Municipals posted positive returns last week as they underperformed Treasuries across most maturities, resulting in higher muni/Treasury ratios. This week we touch on the expanded opportunity within the taxable muni asset class following YTD underperformance.
November 29, 2022
INVESTING
By Michael B. Zelouf, CFA
Mounting macroeconomic evidence pointing to lower inflation and a peaking of official interest rates in the coming months suggest a slowing and eventual reversal of the conditions prevailing in 2022. This could see bonds recover and re-establish their diversifying benefits versus equities and other risk assets.
By Michael J. Bazdarich, PhD
New-home sales rose 7.7% in October and single-family starts declined by 6.1%. Generally, October’s data did little to intensify or stop sharp downtrends, though maybe new-home sales are trying to find a bottom.
By Bud Littman, Robert E. Amodeo, CFA
Tax-exempt municipals posted positive returns last week as municipals outperformed Treasuries across the curve. This week we touch on the implications of expanded marijuana legalization from the recent midterm elections.
November 22, 2022
ECONOMY
By Scott Beatty, CFA, Frederick R. Marki, CFA
Following the release of October CPI data, which showed a smaller increase in inflation than expected, we believe US inflation is likely on the decline.
By Jeff Helsing, Eddie Wang, CFA, Roberto Apelfeld, PhD
With high-yield bonds and similarly rated bank loans offering yields of around 9%-10% at the end of October, public-market yields are very similar to those for private debt markets—this hasn’t occurred since 2007.
November 16, 2022
ECONOMY
By Michael J. Bazdarich, PhD
Today’s retail report is reminiscent of a fast food chain’s old slogan “Where’s the beef?” Increases in nominal sales look “meaty,” and a boost to real sales from declining prices adds to that. But a look at aggregate sales data and data for individual store types reveals that October’s gains fail to improve the drab trends of the last 19 months.
By Thea Okin
Tax-exempt municipals posted positive returns last week as tax-exempt rates followed Treasuries lower. This week we highlight the outcomes of the US midterm elections.
By Matthew C. Graves, CFA, Kevin X. Zhang
Members of our Emerging Markets (EM) Team attended the IMF/World Bank annual meetings last month in Washington, DC. Here we offer some thoughts on how we see things in the EM world, and how attending the meetings might have helped shape our thinking.
By Michael J. Bazdarich, PhD
Core inflation slowed in October, posting a 0.3% increase (3.3% annualized) after September’s rise of 0.6% (7.1% annualized). Both goods and services prices moderated in October. In fact, core goods prices actually declined, posting a -0.4% change (-4.5% annualized), after no change (0.2% annualized) in September. The decline in core goods prices is something we had been expecting.
By Bud Littman
Tax-exempt municipals posted positive returns last week and municipals outperformed the Treasury selloff as Muni/Treasury ratios moved lower across the curve. This week we highlight the scope of bond ballot initiatives in the upcoming midterm election.
November 09, 2022
MARKETS
By Bonnie M. Wongtrakool, CFA, Matthew C. Graves, CFA
The COP27 climate change conference starts this week in Egypt and its participants will push for progress on global climate goals. Here we provide Western Asset’s view on what we expect at this year’s annual meeting, and why we’re optimistic about what it can help accomplish.
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by 233,000 jobs in October, diminished only very slightly by a -11,000 revision to September data. If you were looking for any sign of Fed tightening inhibiting job growth, you would have a hard time finding it in these data.
By Dean French
With the UK gilt market currently in a period of relative calm this is an opportune time to review recent events, their impact on markets and to reassess our investment view.
November 02, 2022
MARKETS
By John L. Bellows, PhD
Following today’s FOMC meeting, it appears likely the Fed will downshift its pace of policy rate increases. We think this is the case because rates were already raised a substantial amount so far this year, real rates are now positive across most parts of the yield curve and elevated geopolitical risks remain.
November 01, 2022
MARKETS
By Michael Linko
Municipals posted negative returns last week as they shrugged off the Treasury rally. This week we highlight the scope of muni bond ballot initiatives in the upcoming midterm election.
By Michael J. Bazdarich, PhD
Full data detail was not available as of the time of this writing, but we can summarize the report: real GDP grew at an annualized rate of 2.6% and the price index for GDP showed annualized inflation of 4.9% in 3Q. All told, nominal GDP rose at a rate of 6.7%, after rates of 6.6% and 8.5% in the preceding quarters.
By Robert E. Amodeo, CFA, Rolf E. Lundelius, PhD
Municipals posted negative returns last week as yields moved higher across maturities. This week we highlight the value of looking beyond sector trends in volatile market conditions.
By Michael J. Bazdarich, PhD
Does a slight net decline in single-family housing starts portend a possible bottoming-out of homebuilding activity? Not even close. Our guess is that single-family housing starts have to decline another 35% before hitting bottom. The backlog of unsold new homes is so crushing that the supply of more homes must drop substantially before inventories of unsold new homes can be worked down.
By Daniel Zheng, Thea Okin
Investment-grade municipals posted positive returns last week amid continued rate volatility. This week we touch upon Chicago’s fiscal 2023 budget release, which highlights continued credit improvement.
By Michael J. Bazdarich, PhD
Headline retail sales, unchanged in September, were held down by declines in sales at vehicle dealers, building material stores and service stations, all of which are excluded from “control” sales, which also excludes restaurants. The more stable “control” measure actually registered an increase of 0.4%.
By Robert E. Amodeo, CFA, Sam Weitzman
Municipals posted positive returns last week despite higher Treasury rates. As we enter the last quarter of a volatile year, this week we provide a third quarter recap.
By John Mooney
Municipals posted negative returns last week and underperformed Treasuries across maturities. This week we highlight the value offered at the short end of the municipal curve.
By Michael J. Bazdarich, PhD
What’s new in the recent data is a slight deceleration in services spending. It is still rising, but at progressively slower rates than we saw in 2021 and early-2022. With the deceleration in services spending, growth in total consumption has slowed as well.
By Rolf E. Lundelius, PhD
Municipals posted negative returns last week as rates moved higher with Treasuries. This week we highlight challenged market conditions that could contribute to near-term market volatility.
By Sebastian Angerer, Ivor Schucking, Daniel Alexander
Western Asset has a constructive secular view for the US banking sector given that we believe its risk profile is much lower now than compared to previous challenged periods.
By Jeff Helsing
In a mild recession scenario, higher borrowing costs and tighter credit conditions would likely weigh on investment and consumption, which could benefit the equity of actively managed collateralized loan obligations (CLOs).
September 21, 2022
MARKETS
By John L. Bellows, PhD
Even before today’s rate hike, inflation expectations were moderating, commodity prices moved lower, the Covid shock started waning and the economy has been responding to Fed tightening. As a result, we expect future Fed surprises will be less likely and may lower the bar for an eventual downshift in the pace of hikes
By Sam Weitzman
Municipals posted negative returns, but outpaced Treasuries. This week, following strong summer supply technicals, we highlight increasing supply conditions that could create favorable opportunities in upcoming weeks.
By Michael J. Bazdarich, PhD
Reported August gains do little or nothing to reverse or even suspend the downtrend in single-family starts over the last nine months. Meanwhile, even after the net declines of the last nine months, current levels of single-family starts are still way too high to arrest the continued build-up of inventories of unsold new homes.
By Michael J. Bazdarich, PhD
Last month, we remarked that the reported July gains in real control sales occurred solely among nonstore retailers, reflecting Prime Day activity for various online vendors. With Prime Day no longer in play in August, it would be expected that sales would pull back, and indeed this was the case.
By Dave Fare
Municipals posted negative returns, but outpaced Treasuries. This week, following strong summer supply technicals, we highlight increasing supply conditions that can potentially create favorable opportunities in upcoming weeks.
By Michael J. Bazdarich, PhD
After a favorable CPI report and even more favorable report for the PCE price index in July, markets were hoping for an encouraging August CPI report. It wasn’t to be. Commentary in the financial press assert increases in most sectors other than petroleum products. That is effectively true, but not completely accurate.
By Desmond Soon, Jie Peng
Here we discuss the most significant issues we see concerning China’s property market as well as the country’s Zero-Covid Policy and its impact on Chinese growth, the yuan and rates.
September 09, 2022
ECONOMY
By Robert O. Abad
We believe the key to an improved tone and more stability in fixed-income markets is a moderation in inflation. Here we discuss factors that point to the easing of global inflation pressures.
By Adauto Lima
After aggressive rate hikes over the last 18 months, we believe that Brazil’s central bank has ended its tightening cycle and most likely rates will be kept “on hold” until mid-2Q23.
By Michael J. Bazdarich, PhD
The real (inflation-adjusted) US merchandise trade deficit narrowed substantially in July. Real imports of consumer goods have declined by a cumulative total of 17.4% (non-annualized) from their March high.
By Michael J. Bazdarich, PhD
Most of the economy (services) has yet to fully recover from the induced 2020 recession and unemployment is low only because millions of workers have yet to rejoin the labor force. Yet the Fed is trying to stifle growth to address the inflation problem.
By Jason Straker, Ivor Schucking, Sebastian Angerer
Learn how the Fed’s current policy tightening cycle is likely to affect both bank deposit and money market fund yields.
By Thea Okin, Daniel Zheng
Municipals posted negative returns last week and underperformed Treasuries in most maturities. This week, as schools begin to open, we highlight growing opportunities in the charter school sector.
By John L. Bellows, PhD
While some anticipated an important or impactful speech from Fed Chair Jerome Powell today in Jackson Hole, his remarks simply reiterated things that are already well known.
August 23, 2022
ECONOMY
By Michael J. Bazdarich, PhD
Last year, the common claim was that homes were very short supply, citing low inventory-to-sales ratios for existing homes. With new-home sales hitting new lows, single-family housing starts—and with them, construction spending—will have to attain yet lower levels to work off a glut of unsold new homes.
By Michael Linko
Municipals posted negative returns and underperformed Treasuries during a week of elevated rate volatility. This week we highlight signs of potentially peaking municipal credit quality.
By Dean French
Elevated market volatility and a sharp rise in European bond yields this year have created dislocations across various asset classes, including European swap spreads. Here we describe why we feel at this point they offer an attractive investment opportunity.
By Michael J. Bazdarich, PhD
With inflation slowing in July but nice job growth continuing, we saw the first meaningful gain in real income since summer 2021. One might have thought that the bounce in real incomes could drive some rebound in retail spending, thus accounting for the July control sales bounce. The reality is more complex.
By Rolf E. Lundelius, PhD, John Mooney, CFA
Municipals posted negative returns during the week as yields moved higher in short and long maturities. This week we highlight the rate dynamics that have challenged the municipal market in the first half of the year, which could be stabilizing.
By Michael J. Bazdarich, PhD
While we can’t take too much solace from one month’s data, CPI came in essentially flat in July (actually down a very slight -0.02%), led by a roughly 8% decline in petroleum products. Outside of food and energy, the so-called core CPI rose 0.3%, a substantial slowing from the prints of recent months.
By Thea Okin, Sam Weitzman
Municipals posted negative returns during the week, but outperformed the Treasury selloff that was driven by hawkish Fed comments and a favorable July jobs report. This week we highlight municipal implications of the Inflation Reduction Act, which has quickly advanced through Congress last week.
August 05, 2022
ECONOMY
By Michael J. Bazdarich, PhD
We’ve been countering that the economy fell into recession in 1H2022, but have been impressed by the severity of Fed rate hikes, signs of plunging homebuilding activity and declines in manufacturing output. So we were expecting some indication of slowing growth in today’s payroll report and were surprised.
By Matt Jones, CFA
This is a summary of the background of new SEC proposals related to money market funds that amend aspects of Rule 2a-7. The proposals were announced in December 2021 and are expected for final publication in October 2022.
By Daniel Zheng, Robert Amodeo, CFA
Municipals posted positive returns during the week and outperformed Treasuries across most maturities. This week we explore pension issues expected to re-emerge following challenged market performance over the past year.
By Michael J. Bazdarich, PhD
Real GDP growth came in at -0.9% in 2Q22, following a -1.5% performance in 1Q22. The fact of two consecutive quarterly declines in real GDP is sure to elicit various claims of recession. As reluctant as we are to agree with official talking heads, we have to do so on this count.
By Thea Okin
Munis posted positive returns for a fifth consecutive week and underperformed Treasuries across most maturities. Amid record heat across the country this summer, this week we explore drought implications on the municipal market.
July 22, 2022
MARKETS
By Richard A. Booth
On July 21, the European Central Bank (ECB) implemented its first rate-based policy tightening since 2011. It is intended to ward off the current high level of inflation and deliver the blueprint of a new policy tool designed to ensure the effective transmission of monetary policy across all eurozone countries.
By Jeff Helsing
Our base case is not for a recession in 2022 in the US, but the risks of a mild recession are rising. We see opportunity in floating-rate, structured credit and fixed-rate segments of the market and in “reopening” industries, like airlines and lodging.
By John Mooney, CFA, Barbara Ferguson
Munis posted positive returns last week and underperformed Treasuries across most maturities. This week we evaluate potential price implications of a significant Fed hike later this month.
By Michael J. Bazdarich, PhD
Total US housing starts declined in June and single-family starts dropped substantially. Cumulatively, single-family starts are down 24.9% from the high achieved briefly in December 2020—but they need to decline further.
By Michael J. Bazdarich, PhD
Essentially all of June’s retail sales rise reflects higher prices, not an increase in sales volume. Real “control” sales have been slowly but steadily declining for the last 15 months, so the June declines are nothing new, and somewhat milder than we expected.
By Sam Weitzman
Munis posted positive returns last week and outperformed Treasuries across the curve. This week we evaluate seasonal summer net supply trends which could strengthen market technicals.
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by 381,000 in June, with a slight -34,000 revision to the May jobs estimate. The total nonfarm payroll gain was +372,000 and a -74,000 revision to May. These job gains should be read as something of a rebuke to those proclaiming the US is already in recession.
By Sam Weitzman
Municipals posted positive returns last week and municipal mutual fund outflows extended a record pace. As we close out the first half of the year, this week we summarize 1H22 performance, technicals and fundamental trends.
By Michael J. Bazdarich, PhD
Consumer spending rose 0.2% in May, alongside 0.5% increases in all three major measures of household income; adjusting for inflation, however, real consumer spending declined by 0.4% and real income declined by 0.1%.
By Robert Amodeo, CFA, Thea Okin
Munis posted positive returns last week and outperformed Treasuries in most maturities. This week we highlight details of first quarter tax receipts across states.
By Mike Borowske
The automotive industry has been, historically, a large source of defaults and restructurings, particularly during recessionary periods—and it was again put to the test during the COVID-19 pandemic beginning in 2020, as automotive executives were forced to revisit their recession playbooks.
By Michael J. Bazdarich, PhD
Homebuilders got something of a reprieve in May, as sales of new homes bounced from the calamitous levels of April. New-home sales rose 10.7% in May from an April level that was revised up by 6.6% from what was announced a month ago.
By Thea Okin, Daniel Zheng
Munis posted negative returns last week and underperformed Treasuries across the curve, resulting in higher Municipal/Treasury ratios. This week we highlight overriding municipal budget themes as we enter a new fiscal year for most municipalities.
By John L. Bellows, PhD
The abrupt change in the Fed’s plans for this week represents yet another hawkish surprise, extending a string of such surprises that started last fall. Going forward we expect the risks around Fed policy to become more balanced.
By Michael J. Bazdarich, PhD
Headline retail sales declined by 0.3% in May, with a -0.4% revision to the April estimate. The more widely watched control sales measure saw essentially no change in May sales, with its April estimated level revised by -0.9%. Both measures declined in “real” terms.
By Michael Linko, Thea Okin, Daniel Zheng
Munis posted negative returns last week and outperformed Treasuries in short to intermediate maturities while underperforming in long maturities. This week we highlight elevated defaults and the potential for additional headwinds in the senior living sector.
By Michael J. Bazdarich, PhD
May CPI inflation gains were not surprising in view of continuing effects of the Ukraine war on energy and grain markets. However, the modest relief seen in core inflation in the preceding months, especially in goods prices, did not recur in May.
By Andreas Billmeier, PhD
With today’s meeting, the ECB attempted to get back into the driver’s seat after a period when constant upside inflation surprises drove market pricing for policy rates higher. We continue to believe that the risks to the interest-rate trajectory are to the downside given the risks.
By Robert Amodeo, CFA, Joseph Genco
Munis posted positive returns for the second consecutive week, as high-grade municipal yields moved 5-16 bps lower across the curve. This week we explore the taxable municipal relative value proposition that has emerged YTD, considering the segment’s distinct buyer base and liquidity considerations.
June 03, 2022
ECONOMY
By Michael J. Bazdarich, PhD
Private-sector payroll jobs rose by 333,000 in May, offset slightly by a revision of -40,000 to the April level. Job gains were widespread, though mild, and a full recovery is still quite a ways away for hard-hit sectors.
By Benjamin Birnbaum
Ever since the minutes of the March Federal Open Market Committee meeting were released on April 6, the agency mortgage-backed securities market has been repricing to anticipate quantitative tightening from the Federal Reserve.
By Michael J. Bazdarich, PhD
The Census Bureau today announced that sales of new homes dropped -16.6% in April from revised March levels. Given the ongoing declines in new-home sales and the build-up of inventories of unsold new-homes, we think this can hardly be seen as an indicator of strength.
By Robert Amodeo, CFA, Rolf E. Lundelius, PhD, Sam Weitzman
Muni yields trailed Treasuries lower last week, but major municipal indices posted negative total returns on spread widening. This week we highlight and evaluate tax-exempt relative value that has emerged amid underperformance so far year to date.
May 19, 2022
MARKETS
By Kazuto Doi, PhD
The Bank of Japan’s stance is currently in sharp contrast with many other central banks: its reinforced Yield Curve Control may lead to QE when interest rates rise outside Japan, while other central banks are preparing for QT. But why is the BoJ really different?
By Dean French
Since the outbreak of COVID-19, the UK economy has been subject to the same drivers as have other major economies. Here we provide additional detail on the current economic outlook for the UK and our thoughts on the expected future path of monetary policy.
By Michael J. Bazdarich, PhD
Headline retail sales showed a 0.9% increase in April on top of a +0.6% revision to the March estimate. This is likely to be read by the Wall Street consensus as a sign of strong demand. We disagree.
By Rolf E. Lundelius, PhD
This year’s global market downturn has led to an unpleasant surprise for municipal investors that often view their municipal allocation as ballast. But municipals’ poor performance can be explained by underlying risk factors and does not reflect credit concerns or unexplained market dislocation.
By Michael J. Bazdarich, PhD
Headline CPI inflation eased to 0.3% per month in April, while core inflation widened to 0.6% in April from 0.3% in March. For both measures, the 12-month inflation rate moderated a bit. The core reading was higher than consensus expectations, while the headline reading was in line with expectations.
By Daniel Zheng, John Mooney, CFA, Vidhu Aggarwal
Negative muni returns extended last week, as high-grade municipal yields moved 5-13 bps higher across the curve, trailing Treasuries. This week we highlight the improving credit trends within the airport sector.
By Michael J. Bazdarich, PhD
US labor data released today showed private-sector jobs rising by 406,000 in April, with a modest -37,000 revision to the March jobs estimate. The jobs gains are way above pre-Covid rates, reflecting the fact that in most industries payroll levels are still way below pre-Covid trends.
By Suzanne Trepp
Thanks to effective Covid vaccines and the lifting of travel restrictions, consumers are rapidly returning to pre-pandemic behaviors, such as flying—for both leisure and business.
By Daniel Zheng
US munis underperformed Treasuries in intermediate maturities last week, but outperformed in short and long maturities. This week we highlight the state of Illinois budget and recent upgrade.
By Michael J. Bazdarich, PhD
The first print on 1Q22 real GDP growth released today showed a -1.4% annualized rate of decline. Like others, we had been looking for a slight growth rate of around 1% until March foreign trade data were released yesterday, showing a huge increase in the trade deficit in March.
By Michael Linko, Fred Poon
US municipals posted negative returns again last week, underperforming Treasuries across the curve. This week we highlight improving agency rating upgrade-to-downgrade activity.
By Jeff Helsing
While we expect inflation to recede as central banks shift to less accommodative policy, investors are searching for strategies to help them protect their portfolios from inflation. One investment class that has the potential to provide generous income in excess of inflation is collateralized loan obligations or CLOs.
By Michael J. Bazdarich, PhD
Housing starts of single-family units fell by 1.7% in March to an annualized rate of 1.20 million units, though upward revisions to January and February levels were almost as large as the March decline. Overall, single-family housing construction looks flat over the last five months at levels only slightly below the highs reached in early-2021.
By Robert E. Amodeo, Joseph Genco, Rolf E. Lundelius, PhD
US municipals posted negative returns this week, with high-grade municipal yields moving 10-14 bps higher across the curve. Municipal funds recorded the largest week of outflows since April 2020. This week we highlight diverging spreads and technicals between taxable and tax-exempt muni markets.
By Michael J. Bazdarich, PhD
Headline retail sales rose 0.5% in March, with the February sales levels revised upward by 0.7%. The bulk of the March sales gains reflected higher gasoline prices, however, so that the widely watched “control” sales declined very slightly (less than -0.1%).
By Dave Fare
This week we highlight the seasonal demand weakness associated with tax season.
By Andreas Billmeier, PhD
Most DM central banks are reducing accommodation, but the need for an outright restrictive monetary stance is not yet clear. We believe the rate-hiking cycle currently priced by the market in the US is aggressive given our expectation for an economic slowdown; we don’t see as much downside risk for the ECB’s rate path.
By Quentin Lafosse
On 10 April, the French people will vote in the first round of the presidential election to choose their leader for the next five years. Our view that ultimately Macron will win hasn’t changed, but the conviction level has declined somewhat.
By Michael J. Bazdarich, PhD
The US merchandise foreign trade deficit declined slightly in February in both nominal and real terms, as import volumes declined a bit more than export volumes. Even with the declines, however, import volumes remained relatively high for the third straight month.
By Robert E. Amodeo, Sam Weitzman
This week we highlight positive US muni fundamental data releases overshadowed by the record muni negative returns during the quarter.
By Michael J. Bazdarich, PhD
Private-sector jobs increased by 426,000 in March, on top of a +129,000 revision to the February estimate. Job gains have been fairly steady, robust, and widespread throughout the last year. Recent gains pale alongside the massive increases that occurred in late-2020, but that is only to be expected.
March 30, 2022
INVESTING
By Brishni Mukhopadhyay, CFA, Alba Abourjeili, CFA
Although securitized products constituted approximately 37% of fixed-income securities issuance in 2021, they are often not included in the discussion regarding ESG (environmental, social, governance) investing. Here we discuss the ESG evaluation of structured products and describe Western Asset’s proprietary methodology.
By Thea Okin, Sam Weitzman
US municipals experienced another volatile week and posted negative returns as high-grade municipal yields moved 21-31 bps higher across the curve. This week we highlight proposed gas tax holidays and the potential impact on state budgets.
By Michael J. Bazdarich, PhD
The U.S. Census Bureau announced this morning that sales of new homes declined 2.0% in February alongside a -1.6% revision to the January estimate (although the December estimate was revised up). The reported declines there are in modest contrast to the data on single-family housing starts, which showed a 5.7% increase in February on top of an upward revision to the January estimate.
By Michael Linko
US municipals experienced another volatile week and posted negative returns as high-grade municipal yields moved 7-9 bps higher across the curve. This week we highlight the impact high gas prices could have on the transportation sector.
By Michael J. Bazdarich, PhD
Headline retail sales rose 0.3% in February, on top of a +1.0% revision to the January sales. Contrary to the media and Street reports we are hearing this morning, we read this retail sales news as continuingly weak.
By John L. Bellows, PhD
Today’s FOMC meeting featured a number of hawkish components. While recent data may justify today’s hawkish message, it is not entirely clear the outlook does. The relative straightforwardness of today’s outcome is likely to give way to something much trickier as growth risks factor more prominently going forward.
By Daniel Zheng
Municipals sold off in sympathy with Treasuries. Technicals remained weak amid persistent fund outflows. This week we highlight the oil implications on state budgets.
By Andreas Billmeier, PhD
At today’s pivotal meeting, the ECB’s Governing Council set its sight on exiting asset purchases as soon as possible without disrupting markets (too much)—a hawkish surprise confirming our expectations that bond yields should continue to drift higher in Europe
March 08, 2022
ECONOMY
By Michael J. Bazdarich, PhD
The US balance of merchandise trade grew larger in January as exports declined and imports rose. In nominal terms, the trade balance went from -$1.21 trillion per year in December to -$1.29 trillion per year in January.
By Robert E. Amodeo, Sam Weitzman
Technicals remained weak amid continued mutual fund outflows along with a building new-issue calendar. This week we highlight the muni market’s reaction thus far to the Russia/Ukraine conflict.
By Michael J. Bazdarich, PhD
Private-sector payroll jobs rose by 653,000 in February, with a +62,000 revision to the estimate for January jobs. Job gains were ubiquitous across industries. In the bad old days of broadcast cigarette ads, one brand advertised “not a cough in a carload.” That slogan came to mind when pouring over today’s employment report, as there was no aspect of it displaying any bad news.
By Andreas Billmeier, PhD
Here we outline our latest thoughts on the market implications of Russia’s invasion in Ukraine. We describe our views regarding the two countries’ economies, and also the broader effects the situation will likely have for both emerging markets and developed markets.
By Vidhu Aggarwal, Rolf E. Lundelius, PhD
US municipals posted positive returns during the week on a flight-to-quality sentiment as high-grade municipal yields moved 4-5 bps lower across the curve. This week we highlight historical municipal performance during Fed hiking cycles.
By Michael J. Bazdarich, PhD
Real consumer spending rose 1.4% in January, partially offset by a -0.2% revision to December. January gains were only “strong” at first glance. The surprise in the release was the softness in services spending—something we hadn’t seen in preceding months.
By Fred Poon
US municipals posted negative returns during the week and generally underperformed Treasuries as ratios moved higher in the short and intermediate part of the yield curve. This week we highlight the impact of labor shortages on the health care sector.
By Michael J. Bazdarich, PhD
Headline retail sales rose 3.8% in January, with a -0.1% revision to the December sales estimate. Net of revisions, headline sales are now estimated to have declined 2.5% in December, prior to the January 3.8% rebound. Control sales are now reported to have declined 4.0% in December before the 4.8% January rise.
By Michael Linko
US municipals posted negative returns during the week and generally underperformed Treasuries in intermediate and long maturities. This week we evaluate recently released higher education enrollment data and its impact on the sector.
February 14, 2022
MARKETS
By Kurt Halvorson
With elevated pricing pressures and uncertainty surrounding Covid and central bank policy, where can investors go to earn a return on capital without assuming unnecessary risk? Is it possible for the corporate bond market to provide good risk-adjusted returns against a backdrop of hot inflation?
By Michael J. Bazdarich, PhD
Foreign trade data released today for December showed real exports rising by 3.2%, while real imports rose by 2.3%.
February 08, 2022
MARKETS
By Robert E. Amodeo, Thea Okin
US municipals posted positive returns during the week and outperformed Treasuries as Municipal/Treasury ratios moved lower. This week we highlight the Illinois Governor’s initial budget address that took place last week.
By Andreas Billmeier, PhD
At its most recent meeting, the European Central Bank’s Governing Council left all policy levers unchanged, according to its post-meeting statement. However, ECB President Christine Lagarde’s much more hawkish press conference following the meeting clearly caught the market by surprise.
By Michael J. Bazdarich, PhD
At one point In Lewis Carroll’s Alice In Wonderland, Alice finds she has to run faster and faster just to stay where she is. We were reminded of that when viewing today’s jobs data and related revisions.
By Sam Weitzman
US municipals posted negative returns and underperformed Treasuries as Municipal/Treasury ratios reverted closer to longer-term averages. This week we highlight implications of the end of a record inflow cycle observed from the spring of 2020.
January 31, 2022
ECONOMY
By Liam P. Lynch, Michael Kim
It’s been almost two years since the global COVID-19 pandemic began and while many things have changed in the economy, a strong US housing industry seems to have remained a constant. Looking forward to the housing landscape of 2022 it appears much as it did at the start of 2021, with a few extra wildcards thrown in the mix.
By Michael J. Bazdarich, PhD
Real GDP growth in 4Q was estimated today to have been 6.9%, compared to 2.3% in 3Q. The estimate today was in line with the Street forecasts we had seen, but higher than our own expectation of 5-point-something percent growth and even more above the outline we provided three months ago, when commenting on the 3Q data.
By Benjamin Birnbaum
The Fed, which was vocal not so long ago about allowing inflation to run above its 2% target, has recently turned decidedly more hawkish. This has major implications for the agency mortgage-backed securities market, which traded at all-time tight spreads during 2021.
By John L. Bellows, PhD
Based on Fed Chair Jerome Powell’s comments at today’s press conference, it appears the current plan is to raise rates starting in March, slow the reinvestment of maturing securities shortly thereafter, and stand ready to accelerate the hiking program should inflation stay persistently high.
By Thea Okin
US municipals posted negative returns and underperformed Treasuries. High-grade municipal yields moved 8-10 bps higher across the curve. This week we highlight progress around Puerto Rico’s record debt restructuring plan.
January 24, 2022
MARKETS
By Richard A. Booth, Frederick R. Marki, Dean French
With headline inflation remaining elevated globally we revisit the specific inflation drivers in three major economies: the US, eurozone and UK.
By Michael J. Bazdarich, PhD
Single-family housing starts declined by 2.3% in December, but this decline was largely offset by upward revisions to the starts data for October and November. These changes follow a substantial bounce in starts in October.
By Robert E. Amodeo, Judith Ewald
US municipals posted negative returns as high-grade yields moved higher with Treasuries. High-grade municipal yields moved 1-8 bps higher across the curve. Municipals generally moved in line with Treasuries, but underperformed in the short end of the curve.
January 14, 2022
ECONOMY
By Michael J. Bazdarich, PhD
Retail sales declined sharply and essentially across the board in December. The headline sales aggregate declined 1.9%, with a slight 0.1% downward revision to November sales estimates.
By Bud Littman
Municipals posted negative returns as high-grade yields trailed Treasuries higher. High-grade municipal yields moved 14 bps higher across the curve.
By Michael J. Bazdarich, PhD
Private-sector nonfarm payrolls grew by 211,000 in December, below the 300,000 per month growth range we had expected to hold in late-2021 and even further below consensus estimates, which congregated around 400,000 or more.
By Dave Fare, Sam Weitzman
Municipal returns were positive during the last week of the year, as the AAA muni yield curve was generally unchanged during the week, with high grade municipal yields rising just 1 bp.
By Michael J. Bazdarich, PhD
Sales of new, single-family homes rose by 12.4% in November. That increase sounds impressive until you fold in the fact that the reported increase comes off an October sales level that was revised lower by -11.1%.
By Andreas Billmeier, PhD
At today’s meeting, the European Central Bank’s (ECB) Governing Council (GC) decided on a gradual reduction of its monetary stimulus which, in the baseline scenario, is going to take most of 2022 to achieve.
December 15, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Headline retail sales rose just 0.3% in November, with no revision to the October estimated level.
By John L. Bellows, PhD
Today the Federal Reserve (Fed) moved forward with its program of withdrawing the extraordinary accommodation it had put in place during the pandemic. The Fed accelerated the tapering of asset purchases, doubling the pace of reductions to $30 billion per month, so that purchases will be completed by mid-March 2022.
By Sam Weitzman, Dave Fare
The US AAA muni yield curve was unchanged during the week. Municipals shrugged off the rate selloff as Municipal/Treasury ratios were grinding tighter.
By Quentin Lafosse
In the wake of recent elections in Germany, another core country in the eurozone is getting ready for the polls. French elections are scheduled for April 2022, but we already have sufficient clarity on who the candidates will be.
By Constantin Wolf
Private equity leveraged buyout (LBO) volumes are running at record highs for 2021 (year to date), according to Bloomberg. This remarkable wave of LBO activity appears to show no sign of abating.
December 13, 2021
MARKETS
By Robert O. Abad
Another Covid variant, China property market woes and inflation fears. Markets have been unsettled over the past few weeks by these asteroid warnings, and rightly so, as they all have the potential to deeply impact people and portfolios
By Thomas Goark
In 2013, the Federal Open Market Committee (FOMC) announced its intention to utilize an overnight reverse repurchase agreement (RRP) facility as a tool to support effective policy implementation by helping to control the fed funds rate
By Andreas Billmeier, PhD
Here we conclude our series of blogs on the German federal election, which took place in late September. The new coalition’s policy program has been negotiated, approved and signed by all parties involved, the personnel roster is complete and the government has been confirmed by the Bundestag a few days ago.
By Judith Ewald, Robert E. Amodeo
The AAA US muni yield curve moved 3 bps lower across intermediate and long maturities. Municipals underperformed the Treasury rally and Municipal/Treasury ratios moved higher as demand softened around the Thanksgiving holiday.
By Michael J. Bazdarich, PhD
The US balance on foreign trade improved dramatically in October, to a deficit of -$67.1 billion, from -$81.4 billion in September, as exports rose 8.1% versus a 0.9% rise in imports.
December 03, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Private-sector payroll jobs rose by 235,000 in November, with the October jobs total revised upward by 73,000.
By Thea Okin, Sam Weitzman
The AAA US muni yield curve moved 1-3 bps lower across the curve. Municipals underperformed Treasuries, resulting in modestly higher ratios.
November 29, 2021
MARKETS
By Jason Straker
On November 1, 2021, the President’s Working Group on Financial Markets in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency published a detailed report on the stablecoin market called the PWG Report.
November 24, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Housing industry data this month for October showed single-family starts dropping by 3.9% from September’s levels, while sales of new single-family homes eked out a small, 0.4% gain. Neither datum changed the trends for homebuilding in place since late-2020.
By Bonnie M. Wongtrakool
Gender bias continues to be a complex issue in the finance industry. To address this, I recently joined forces with Monica Erickson, Pooja Malik and Jerilyn Castillo McAniff to launch the California Chapter of the Bloomberg Women’s Buy-Side Network (BWBN).
By Rolf E. Lundelius, PhD, Robert E. Amodeo
The US muni yield curve moved 2-5 bps lower during the week. Municipals shrugged off the Treasury rate selloff and outperformed across all maturities.
By Robert E. Amodeo, Michael Linko
The US muni yield curve moved 2-5 bps lower during the week. Municipals shrugged off the Treasury rate selloff and outperformed across all maturities.
November 16, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Headline retail sales rose 1.7% in October, with a large +1.4% revision to September.
By Jeff Helsing
The culmination of strong nominal growth, low default rates, rising equity multiples and low interest rates among other factors have fueled a surge in the supply of credit securities.
November 09, 2021
MARKETS
By Judith Ewald
The US muni yield curve moved 1 to 11 bps lower during the week. Municipals underperformed Treasuries in short maturities and outperformed Treasuries in long maturities.
By Michael J. Bazdarich, PhD
Data released today by the Bureau of Labor Statistics (BLS) show private-sector jobs rising by 604,000 in October, with the September jobs estimate revised upward by 220,000, and with the upward revision to job gains split about equally between August and September.
By Desmond Soon, Jie Peng
China’s bond market has been making headlines lately due to the high-profile credit woes of a few highly leveraged property developers such as Evergrande and Fantasia.
By Michael Linko, Thea Okin
The US muni yield curve flattened as short-term yields moved higher while intermediate and long maturities moved 3-4 bps lower.
By Michael J. Bazdarich, PhD
Real GDP growth in 3Q was estimated today to have been 2.0%, compared to 6.6% in 2Q. This estimate was higher than some recent forecasts that had been as low as zero.
By Dave Fare, Fred Poon
US muni yields moved 5-8 bps higher across the curve. Municipals modestly underperformed Treasuries as ratios moved higher while technicals softened amid weakening demand and increased supply.
By Jonathon Costello
As vaccination rates rise around the globe and countries continue to make strides toward a return to more normal economic and social conditions, the emergency policy settings put in place to help ward off a more painful economic slowdown are starting to roll off.
By Robert E. Amodeo, Judith Ewald
US muni yields moved 1 bp lower across intermediate and long maturities. Municipals underperformed the Treasury rally in short and long maturities, but outperformed on the short end.
October 19, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Single-family housing starts were unchanged in September, off an August level that saw very slight upward revisions
October 15, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Headline retail sales rose 0.7% in September. Street analysts focus more on sales excluding vehicle dealers, service stations, building material stores and restaurants in order to focus on less volatile, consumer-centric store types.
By Thea Okin, Sam Weitzman
US muni yields increased 1 to 4 bps across the curve. Municipals outperformed the Treasury selloff as ratios grinded 4% to 6% lower.
By Michael J. Bazdarich, PhD
Private-sector nonfarm payroll jobs rose by 317,000 in September, with the August level revised upward by 107,000. Meanwhile, total nonfarm payroll jobs rose by just 194,000, impacted by a reported decline in public-school jobs.
By Matthew C. Graves, Bonnie M. Wongtrakool
The Intergovernmental Panel on Climate Change (IPCC) released its Sixth Assessment Report last month. Unsurprisingly, the report warns that global temperatures are almost certain to rise by more than 1.5 degrees Celsius by the year 2040—a direct result of the human impact on climate change.
By Robert E. Amodeo, Dave Fare
US muni yields increased 7 to 14 bps across the curve. Munis underperformed Treasuries as ratios moved 2% to 9% higher.
By Liam P. Lynch
US housing data has begun to show a cooling cycle emerging from what has been a hot housing market. Perhaps one of the more noticeable data points of late is the recent change to the median price of existing homes sold, down 0.8% month-over-month.
By Michael B. Zelouf
Headline housing starts rose 3.4% in August from a July level that was revised slightly upward. The more important single-family starts measure declined by 2.8%, continuing its downtrend of the past eight months.
By Robert E. Amodeo, Bud Littman
Municipals were relatively unchanged during the week and fund flows maintained a record pace. AAA muni yields moved 1 basis point higher in long maturities. Munis outperformed Treasuries in short maturities in short and intermediate maturities.
By Michael J. Bazdarich, PhD
Headline retail sales rose by 0.7% in August, with the July sales estimate essentially unrevised. Excluding sales of vehicle dealers, building material stores, gas stations and restaurants, so-called “control” sales rose 2.5%, though with a -0.7% revision to July.
By Kevin Ehrlich, Robert Gingrich, PhD
With the recent adoption by the US Securities and Exchange Commission of Rule 18f-4, US mutual funds are working toward implementation of a new framework governing the use of derivatives and financing transactions.
By Sean Rogan, Anthony Francis
On Friday September 10, the Australian Prudential Regulation Authority announced that by the end of FY22, locally incorporated Authorised Deposit-taking Institutions should reduce their reliance on the Committed Liquidity Facility to zero, subject to market conditions.
By Rolf E. Lundelius, PhD, Sam Weitzman
US muni yields moved 1 bp higher in intermediate and long maturities. Munis outperformed Treasuries in short maturities but underperformed in long maturities.
By Keith Luna, Alex Warren
At the National Association of Insurance Commissioners’ Summer 2021 National Meeting, the Risk-Based Capital working groups for P&C and health insurers both adopted their respective proposals for new bond-level factors. The adoption of these new bond factors parallels work already completed by the life insurer RBC working group, and the new factors will go into effect at the end of this year.
By Andreas Billmeier, PhD
At today’s meeting, the European Central Bank’s (ECB) Governing Council left its policy instruments largely unchanged, with one important exception: It judged, unanimously, that maintaining favourable financing conditions can be accomplished at a moderately lower pace of net asset purchases under the Pandemic Emergency Purchase Programme (PEPP) compared to the previous two quarters.
By Jeff Helsing
Buried in post-crisis history and the regulations that followed lies an important secret about credit markets: the foundation for the greatest distortion drivers between price and fundamental value in fixed-income markets were created by the regulations implemented in response to the Great Depression.
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by 243,000, with 134,000 of upward revisions to the July estimate. In pre-pandemic days, those gains cum revisions would have been headline news strong.
By Andreas Billmeier, PhD
Here we update our earlier views on the German elections scheduled for September 26, and the potential market implications.
By Michael J. Bazdarich, PhD, Sam Weitzman
US munis posted negative returns as high-grade yields moved 2-3 bps higher across the curve, trailing Treasuries. Muni outperformance versus Treasuries resulted in 1% lower ratios in intermediate and long maturities.
August 30, 2021
STRATEGY
By Benjamin Birnbaum
With Democratic control of the White House and Congress, the course of Fannie Mae, Freddie Mac and Ginnie Mae policy is being reshaped.
By John L. Bellows, PhD
The Federal Reserve’s plans for tapering its asset purchases have become increasingly clear over the past two weeks.
August 24, 2021
ECONOMY
By Michael J. Bazdarich, PhD
New-home sales rose a very slight 1.0% in July. Though there were some modest upward revisions on net to previous months’ sales estimates, there was nothing in today’s release to suggest a turnaround from the declining trend new-home sales have followed since August 2020 ...
By Judith Ewald
AAA muni yields moved higher across the curve, which continued to steepen; yields moved 1 bp higher in 5-years and 7 bps higher in 30-years.
By Michael J. Bazdarich, PhD
Headline retail sales declined 1.1% in July, though the June sales estimate was revised up by 0.6%. The July sales release marked the fourth straight month that sales fell short of market expectations, but still remained above the trend path that was in place prior to the Covid shutdown.
By Robert E. Amodeo
AAA muni yields moved higher across the curve, which continued to steepen; yields moved 1 bp higher in 5-years and 7 bps higher in 30-years.
By James J. So
About a year ago one vein of concern we pushed back against was alarm over the massive amount of bonds corporate America was issuing. US investment-grade credit did hit a new record in 2020, exceeding $2 trillion of gross new supply, whereas that figure averaged approximately $1.3 trillion in the preceding five years.
By Robert E. Amodeo, Michael Linko, John Mooney
AAA muni yields moved higher across the curve which continued to steepen; yields moved 1 bp higher in 5-years and 4 bps higher in 30-years. US munis outperformed Treasuries across the curve, bolstered by persistently strong technicals.
By Michael J. Bazdarich, PhD
Private-sector jobs rose by 703,000 in July, with the June jobs estimate revised upward by a substantial 146,000. We routinely focus on private-sector jobs, in order to emphasize developments in the market economy.
August 04, 2021
ECONOMY
By Michael J. Bazdarich, PhD
The inflation fears that were so prevalent just a few months ago seem to have subsided recently, if only within the confines of the financial markets. Certainly bond yields that had risen so sharply from August 2020 through March 2021 have pulled back substantially in the months since.
By Powell Thurston, Alan Nadel, PhD, Sam Weitzman
The AAA muni yield curve steepened for the third consecutive week, moving 1 bp lower in 5-years and 3 bps higher in 30-years.
By Michael J. Bazdarich, PhD
The Bureau of Economic Analysis within the Commerce Department today released its “advance” estimate for 2Q21 GDP. That release showed estimated 2Q growth of 6.5% (annualized). The release also contained benchmark revisions to the GDP components stretching all the way back to 1999, but said revisions had no visible effect on reported growth contours.
By Robert E. Amodeo, Thea Okin
The AAA muni yield curve steepened for the second consecutive week, moving 3 bps lower in 5-years and 1 bp higher in 30-years. US munis underperformed Treasuries in short and long maturities, sending ratios modestly higher.
By Jason Straker
It was previously announced that all forms of LIBOR would cease to exist at the stroke of midnight on New Year's Eve 2021. However, like many well-intentioned plans in the past 18 months, COVID-19 has now pushed this target date back for some tenors of USD LIBOR to acknowledge that institutions have had their energies distracted by the pandemic.
July 20, 2021
STRATEGY
By Robert O. Abad
Market nervousness around another global COVID-19 flareup has brought into question the sustainability of the economic reopening trade, and rightly so.
By Fred Poon
The health care sector has been a top performing investment-grade municipal sector YTD. Through July 14, the sector returned 2.99%, outperforming the Bloomberg Barclays Municipal Bond Index by 221 bps and leading all investment-grade municipal sectors.
By Michael J. Bazdarich, PhD
Headline retail sales rose by 0.6% in May, but after a -0.4% revision to the May estimate, leaving a slight change on net over what sales were estimated to be one month ago.
By Robert E. Amodeo, Thea Okin
AAA municipal yields moved 9-14 bps lower during the week. US municipals outperformed Treasuries as muni technicals strengthened.
By Sebastian Angerer, Ivor Schucking
The global financial crisis (GFC) exposed the former banking business model as high-risk and unsustainable based on weak balance sheet fundamentals, primitive risk management and inadequate regulation.
By Andreas Billmeier, PhD
The European Central Bank (ECB) today finalized the results of its Strategy Review, the first since 2003. Progress had been suspended for six months by the pandemic, but the final communication came a bit impromptu via a quickly organized press conference.
By Alba Abourjeili
Over a year into the COVID-19 crisis and response, one of the surprising economic winners from this terrible virus has actually been the US consumer. They entered the pandemic better prepared and more resilient than before the 2008 global financial crisis to weather the shocks of the Covid-induced lockdown.
By Robert E. Amodeo, Sam Weitzman
AAA municipal yields moved 5 bps lower in intermediate and long maturities, trailing Treasuries lower. US municipals underperformed Treasuries as Municipal/Treasury ratios moved 1% to 4% higher during the week.
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by 662,000 in June, with May data revised upward by 31,000. Typically, we focus on a measure of private-sector jobs that excludes the especially seasonally volatile construction and retailing sectors.
By Robert E. Amodeo, Kathryn L. Montgomery
AAA municipal yields moved up to 7 basis points (bps) higher across the curve as municipals outperformed Treasuries (USTs) amid strong technicals. The Bloomberg Barclays Municipal Index returned -0.17%, while the HY Muni Index returned 0.04%. High-grade municipal yields trailed USTs higher during the week.
By Michael J. Bazdarich, PhD
Sales of new homes declined by 5.9% in May from an April level that was itself 5.3% lower than the April estimate originally published a month ago. With the May decline, new-home sales now look to have been on a downtrend for the past nine months, with a cumulative decline of 21.3% over that span.
By Sam Weitzman, Rolf E. Lundelius, PhD
US municipals significantly underperformed Treasuries, taking ratios off historically rich lows. AAA municipal yields moved 6 to 10 bps higher across the curve.
By Liam P. Lynch
The US housing market continues to show its strength, with both the CoreLogic and Case-Shiller Home Price indices printing year-over-year gains of 12.9% and 13.2%, respectively. One of the major themes when trying to explain the record heights of US home prices has been the lack of purchasable inventory.
By Swee Ching Lim
Steady GDP growth in the Asia-Pacific region since the turn of the millennium has underpinned the secular development of fixed-income markets. This signifies a stark contrast to the market backdrop of the 1990s.
June 16, 2021
ECONOMY
By John L. Bellows, PhD
The US economic data has surprised in both directions since the previous Federal Open Market Committee (FOMC) meeting. The employment data has been surprisingly weak. Fewer than 300,000 jobs were added in April, followed by a slightly better but still disappointing 550,000 jobs in May. The inflation data, on the other hand, has been surprisingly strong.
By Robert E. Amodeo, Michael J. Bazdarich, PhD, Dave Fare
US municipal yields moved lower with Treasuries during the week. AAA municipal yields mover 4-9 bps lower across the curve, generally in line with Treasuries.
By Andreas Billmeier, PhD
At today’s meeting, the European Central Bank’s (ECB) Governing Council (GC) left its policy instruments unchanged. In particular, the commitment to purchase assets under the Pandemic Emergency Purchase Programme (PEPP) at a “significantly higher pace” than in the first few months of the year was rolled over into Q3.
By Robert O. Abad
With index yields in the credit market hovering between 3% and 4%, investors may be wondering what value, if any, is left. To us, this is a classic case of “don’t judge a book by its cover.”
By Robert E. Amodeo, Charles Bardes, Michael Linko
Municipals posted positive performance as yields moved lower during the week, supported by the rally in Treasury rates and strong supply and demand technicals.
By Michael J. Bazdarich, PhD
Private-sector payroll jobs increased by 492,000 in May, with a +17,000 revision to the April estimated level. Gains were widespread across industries, with the previously Covid-stricken restaurant, recreation, and accommodations industries leading the way, up 186,000, 72,000 and 35,000, respectively.
By Richard A. Booth
Following up on our blog post about the impact of COVID-19 on inflation, this post takes stock of our current inflation views and how market pricing has evolved. The temporal goods supply/demand mismatch that we highlighted previously is likely at or close to its zenith.
By Andreas Billmeier, PhD
In this blog entry, we set out our early views regarding topics, parties and candidates for the German elections on September 26, 2021, and the potential implications for markets. We plan to update these views as we get closer to the election date and polls crystallize.
By Michael J. Bazdarich, PhD
Headline durable goods orders declined in April by 1.3%, on top of a 0.3% downward revision to the March level. However, excluding transportation equipment, new orders for other durable goods registered a 1.0% gain on top of a 0.4% upward revision to March.
By Robert E. Amodeo, Thea Okin
AAA municipal yields were unchanged during the week. Munis modestly underperformed the Treasury curve flattening, with ratios moving higher in intermediate and long maturities.
By Matt Jones
The Fed’s accommodative monetary policy has had very contrasting effects on short- and long-term rates. Money market yields continue to collapse toward zero, driven by the wall of liquidity available in the banking system, while the 10-year US Treasury (UST) yield has seen a stop-start upward pressure due to increasing inflation fears.
By Michael J. Bazdarich, PhD
Aggregate US housing starts declined by 9.5% in April, with single-family starts within that total down by 13.4%.
By John Mooney, Robert E. Amodeo
Accommodative monetary policy and persistent demand for tax-exempt income have challenged municipal investors with record low yields, particularly at the short end of the muni curve.
By Dean French
This month’s regional election in Madrid attracted a reasonable amount of attention, which provides an opportunity for us to share our thoughts, to explain both why we think the national impact is limited and the reasons why our investment view remains intact.
By Michael J. Bazdarich, PhD
Headline retail sales were flat in April, with a slight +0.1% revision to the March estimate. For the more widely tracked “control” measure, which excludes vehicle dealers, building material stores, gas stations and restaurants, sales were down 1.5%, with a -0.2% revision to the March estimate.
By Desmond Soon, Jing Kai Ng
Dependency ratios have been increasing across developed Asia following the post-WWII baby boom. Following trends in developed Western economies, people in Asia are living longer and having fewer children in urban areas due to the higher cost of living and the personal/financial freedom tradeoffs associated with few or no children.
By Rolf E. Lundelius, PhD
US municipal yields moved lower during the week in sympathy with the drop in Treasury yields. AAA municipal yields also generally moved lower over the week.
By Jason Straker
Until last year, it was widely accepted that the main replacement for US dollar LIBOR would be the Secured Overnight Financing Rate (SOFR), with different alternative rates replacing LIBOR in other currencies.
By Michael J. Bazdarich, PhD
Private-sector payroll jobs rose by 218,000 in April, with the March level revised down by 8,000. While these would have been satisfactory gains prior to the Covid pandemic, they were a huge disappointment relative to market expectations, where consensus expectations were for gains of around 1,000,000 and where some had called for as many as 7,000,000 net new jobs.
By Kathryn L. Montgomery
US municipals posted negative returns this week as yields moved higher. AAA muni yields moved 4 to 7 bps higher during the week. Muni/Treasury ratios generally moved higher as munis underperformed Treasuries in short maturities.
By Brishni Mukhopadhyay
Fixed-income investors play a key role as creditors in assessing material environmental, social and governance (ESG) risks and opportunities that may impede creditworthiness of bond issuers. While ESG integration has often been associated with equity investing, integration of these facets should be a central tenet for bond investors too.
By Michael J. Bazdarich, PhD
Real GDP grew at a 6.4% annualized rate in 1Q21, about in the middle of the range of Wall Street forecasts. As expected, the bulk of the growth came from consumer spending, which grew at a real annualized rate of 10.7%.
By Robert E. Amodeo, Barbara Ferguson, Michael Linko
US municipals posted positive returns this week as AAA muni yields were unchanged.
April 26, 2021
MARKETS
By Benjamin Birnbaum
If you want to quicken the pulse of any mortgage investor, just mention May of 2013.
By Michael J. Bazdarich, PhD
New-home sales rose a very strong 20.7% in March, and this was off February levels that were revised upward substantially.
By Thea Okin, Dave Fare
AAA Municipal yields moved 9-11 bps lower across the curve during the week. Municipals outpaced Treasuries on strong technicals, with short-end ratios touching record lows.
April 15, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Retail sales rose strongly in March, with the headline sales statistic up 9.8% on top of a +0.3% revision to the February sales estimate.
By Robert E. Amodeo, Bud Littman
This week we explore the latest infrastructure developments following the release of President Biden’s $2.3 trillion American Jobs Plan.
By Michael J. Bazdarich, PhD
February foreign trade data released today by the Census Bureau show merchandise exports down, imports up and the trade deficit up commensurately.
By Michael Linko, Sam Weitzman
This week we touch on the potential return of tax-exempt advance refunding and how that could shape tax-exempt and taxable muni market technicals.
April 02, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Private-sector payrolls rose a very strong 780,000 in March, on top of a +121,000 revision to the February estimate.
By Judith Ewald, Robert E. Amodeo
This week we explore the restrictions placed on the massive stimulus package that could shape the scope of local fiscal policy in the near term.
By Desmond Soon, Razmik Kirakosyan
In this post, we explore continuing shifts in Asia supply chains in the later stages of the COVID-19 pandemic.
By Michael J. Bazdarich, PhD
New-home sales dropped by 18.2% in February to an annualized rate of 775,000 units per year.
By Fred Poon
We believe tax revenues received from sports gambling should help support states’ minor budget issues and target select education and infrastructure programs. However, the tax revenues should not be considered a panacea for states’ larger, structural challenges.
By John L. Bellows, PhD
A lot has changed since the last time the Fed published its economic forecasts. Last December Covid infections were rising quickly, causing a renewed set of restrictions on mobility and activity, and the prospect of a divided US government weighed on expectations for fiscal policy and future growth.
By Michael J. Bazdarich, PhD
Headline retail sales declined -3.0% in February, though that drop was offset somewhat by a huge, +1.9% upward revision to the January sales estimate.
By Dave Fare, Sam Weitzman
US municipal yields moved lower despite rising Treasuries. AAA municipal yields moved 5-11 bps lower across the curve.
By Matt Jones
Once again prime and tax-exempt money market funds (MMFs) have fallen under regulatory scrutiny following a market crisis.
By Andreas Billmeier, PhD
At today’s meeting, the European Central Bank’s (ECB) Governing Council (GC) surprised markets by including an explicit commitment to a “significantly higher pace” of purchases under the Pandemic Emergency Purchase Programme (PEPP) over the next quarter. This decision was taken unanimously.
By Liam P. Lynch
The recent surge in national home prices has some market participants questioning the possible formation of a housing bubble in residential real estate.
By Judith Ewald, Thea Okin
US municipal yields moved lower across the curve, despite the Treasury selloff. AAA municipal yields moved 4-8 bps lower across the curve.
March 08, 2021
ECONOMY
By Alba Abourjeili
Two key student loan proposals are front and center in the new Biden administration and have gained momentum in light of the COVID-19 pandemic. They involve student loan forgiveness and expansion of the payment forbearance program.
By Michael J. Bazdarich, PhD
Headline private-sector jobs rose by an apparently strong 465,000 in February, but there were so many undercurrents within the data that this is misleading.
By Joseph A. Filicetti
We believe the current fervor around rising rates and inflation in the US seems extraordinarily optimistic at this point.
March 03, 2021
ECONOMY
By Amit Chopra
The financial world is experiencing some unique and unprecedented circumstances. We are confronting a pandemic that took the US by surprise and has caused tremendous human and economic hardship.
By Robert E. Amodeo, Michael Linko
US municipal yields moved higher across the curve. Municipal fund flows decelerated but remained positive.
By Michael J. Bazdarich, PhD
Durable goods order rose a strong 3.4% in January, and even excluding volatile transportation equipment, “core” durables orders were up a nice 1.4%, with both series also seeing substantial revisions to the previously announced December data.
By Thea Okin, Robert E. Amodeo
US municipal yields moved higher across the curve last week. Municipal fund inflows continued despite the market weakness.
By James Raffini
Nowhere in previous publications have we made the claim that positive alpha is easy to generate. Investment managers, however, have shown results over time that reflect the benefits of an active approach to high-yield investing.
By Michael J. Bazdarich, PhD
So much for fears that the US consumer is foundering. Retail sales rocketed higher in January, with headline sales up 5.3% from December, and so-called control sales measures up 6.0% to 6.2%.
By Rolf E. Lundelius, PhD, Sam Weitzman
Municipal yields grinded lower, outperforming Treasuries over the week. Municipal mutual funds recorded a 14th consecutive week of inflows.
By Thea Okin
Municipal yields moved modestly higher. Municipal mutual funds recorded a 13th consecutive week of inflows.
February 05, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by only 6,000 in January. Further losses in shutdown sectors such as restaurants and entertainment were accompanied by slight declines in construction and manufacturing and only slight gains elsewhere.
February 02, 2021
ECONOMY
By Robert E. Amodeo, Sam Weitzman
Municipals rallied and outperformed Treasuries during the week. Municipal mutual funds recorded a 12th consecutive week of inflows.
By Robert O. Abad
With corporate credit spreads moving closer to trading through pre-Covid crisis lows, many clients are looking for insight on potential market vulnerabilities.
By Michael J. Bazdarich, PhD
Real GDP rose at a 4.0% annualized rate in 4Q20. This is somewhat below consensus expectations that were clustered in the high-4% to low-5% range.
By Robert E. Amodeo, Kathryn L. Montgomery
Municipals rallied and outperformed Treasuries during the week. Municipal mutual funds recorded an 11th consecutive week of inflows.
By Chia-Liang Lian
Drawing parallels between dining and investing, there are some interesting observations when juxtaposing the transformation of dim sum with the development of emerging markets (EM) investing.
January 21, 2021
ECONOMY
By Michael J. Bazdarich, PhD
Total housing starts rose a strong 5.8% in December to a rate of 1.669 million per year, with November’s level revised upward by a bit more than 2%.
By Michael Linko, Sam Weitzman
Municipal yields moved modestly higher across the curve, underperforming Treasuries. Municipal mutual funds recorded a tenth consecutive week of inflows.
By Michael J. Bazdarich, PhD
Headline retail sales decreased by 0.7% in December, with the November sales total revised downward by 0.3%.
January 15, 2021
MARKETS
By Bonnie M. Wongtrakool
In our analysis of potential election outcomes last fall, we outlined how a second Trump term would continue to challenge ESG-oriented investors and companies, and how a Biden victory would result in a more supportive environment, subject to the ideological balance within Congress.
January 13, 2021
MARKETS
By Robert O. Abad
“Civil disobedience turned violent. Government leaders forced to flee.” These were the words we used to describe the tumult taking place in Chile and Hong Kong in a 2019 blog post titled, Don’t Underestimate the Cost of Social Risk.
By Robert E. Amodeo, Michael Linko
Municipal yields moved higher across the curve, but outperformed the heavy Treasury selloff during the week. Municipal mutual funds recorded a ninth consecutive week of inflows.
By Kevin J. Ritter, Mark Hughes
In our recent client travels (virtual, of course!), Western Asset has noted that our insurance investor base is increasingly viewing emerging markets (EM) debt as an attractive opportunity in a post-pandemic, reflationary environment.
By Powell Thurston, Keith Luna
The year 2020 will long be remembered for the COVID-19 pandemic and extraordinary levels of both geopolitical uncertainty and volatility in markets.
By Michael J. Bazdarich, PhD
Private-sector employment declined by -93,000 in December, as job losses at sectors hit by newly re-imposed Covid-related shutdowns more than offset sizable gains elsewhere.
By Robert E. Amodeo, Judith Ewald, Sam Weitzman
Municipal yields were unchanged during the quiet holiday-shortened week. Fund flows remained positive while new-issue supply was virtually non-existent during the last two weeks of 2020.
December 31, 2020
MARKETS
By Gordon S. Brown
Since our last update in June, recent trade talks between the UK and EU have followed several plot twists and moments of suspense worthy of a festive blockbuster movie.
By Michael J. Bazdarich, PhD
Data released today showed a 0.4% decline in consumer spending, a 1.1% decline in personal income and an 11.0% decline in new-home sales, all for November.
By Robert E. Amodeo, Judith Ewald
Municipal yields moved slightly higher in intermediate and long maturities, but outperformed Treasuries. Fund flows remained positive and supply was elevated as issuers took advantage of the year’s last full week of trading.
By Dean French
In our blog that was published in February, Thoughts on Spain’s New Coalition we shared our belief that the coalition government led by Pedro Sánchez was likely to prove longer-lasting than many had believed at first.
By Bonnie M. Wongtrakool
Recent vaccine breakthroughs have injected some sunshine into the ongoing devastation of the COVID-19 storm. Though the fight against surging coronavirus infections goes on, the upcoming vaccines should provide a bridge back to more regular daily life for many people over the coming year.
December 16, 2020
MARKETS
By John L. Bellows, PhD
The Federal Open Market Committee (FOMC) found itself in a tricky spot at today’s meeting. On the one hand, current economic conditions have deteriorated since the Committee last met six weeks ago.
By Michael J. Bazdarich, PhD
Total retail sales declined 1.1% in November from an October level that was revised lower by 0.2%.
By Sam Weitzman
Municipal yields moved lower across the curve, but underperformed Treasuries. Municipal technicals remained favorable as positive fund flows continued. A record issuance year was driven by heightened taxable supply.
By Andreas Billmeier, PhD
At today’s meeting, the European Central Bank’s Governing Council introduced a significant recalibration of its instruments, including a nine-month extension of the Pandemic Emergency Purchase Programme, to March 2022, and a continuation of bank financing at ultra-low rates through 2021.
By Thea Okin
Municipal yields were generally unchanged during the week. Municipal supply remained elevated. AAA municipal yields were mostly unchanged, moving 1 bp higher in short maturities, and 1 bp lower in intermediate maturities.
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by 344,000 jobs in November, with a slight +9,000 revision to the October estimate. This gain was above the 307,000 gain suggested by ADP Wednesday.
December 01, 2020
MARKETS
By Robert E. Amodeo
Municipal yields were generally unchanged during the week. Technicals remained strong amid positive demand and limited new-issue volume.
By Michael J. Bazdarich, PhD
New orders for durable goods rose 1.3% in October, on top of a slight 0.1% upward revision to September.
By Judith Ewald, Dave Fare
Municipals rallied across the yield curve and outperformed Treasuries. Strong demand for tax-exempt municipal debt persists.
By Steven T. Saruwatari, Razmik Kirakosyan
The latest COVID-19 vaccine trial results have been the most promising by far, but the enormous macro challenges going into 2021 must not be downplayed.
By Michael J. Bazdarich, PhD
Financial markets have wobbled in recent months alongside the chances for another anti-Covid stimulus package from the federal government. While the negotiations in Washington make for good political theater, our analysis indicates that further stimulus is not needed by American households.
By Sam Weitzman, Robert E. Amodeo
Municipals yields were relatively unchanged, outperforming Treasuries. Strengthening technicals supported high-yield municipal outperformance.
By Michael J. Bazdarich, PhD
Total retail sales rose 0.3% in October, on top of a +0.5% revision to the September level, in data released this morning by the Census Bureau.
By Mark Hughes
With US elections largely in the rearview mirror, global markets must once again face down the ongoing COVID-19 pandemic.
By Douglas A. Hulsey
As of this writing, it looks like the election dust storm is clearing and that Joe Biden has been elected the 46th President of the United States. Republicans appear to have retained control of the Senate, subject to the final election results in Georgia and North Carolina.
By Robert E. Amodeo, Sam Weitzman
Municipals outperformed Treasuries, as Muni/Treasury ratios declined below 100% over the week. AAA municipal yields moved 3 to 15 bps lower across the curve.
By Michael J. Bazdarich, PhD
Private-sector payrolls rose by 906,000 jobs in October, above expectations and hugely above the 365,000 gain projected by the ADP survey.
November 03, 2020
MARKETS
By Judith Ewald, Thea Okin, Bud Littman
The monthly municipal supply just made a new record. AAA municipal yield changes were mixed as the yield curve flattened.
By Michael J. Bazdarich, PhD
Real GDP grew at a 33.1% annualized rate in 3Q20. Context is everything, so let’s recount the various perspectives of this number.
By Andreas Billmeier, PhD
At today’s meeting, the European Central Bank’s (ECB) Governing Council (GC) left all major policy levers unchanged but pre-announced changes that will be rolled out at the next meeting.
By Michael Kim
Over the past few years, the US health care legislative agenda has been focused on lowering overall health care costs by improving price transparency and reducing the cost of high-priced prescription drugs.
By Robert E. Amodeo, Thea Okin
Municipal yields moved higher as Treasuries retreated. AAA municipal yields increased 2 bps across intermediate and long maturities, trailing Treasuries higher.
By John L. Bellows, PhD
There has been a lot of discussion about whether US Treasury bonds will continue to function as a diversifier or hedge for portfolio risk.
By J. Gibson Cooper, René Ledis
The two presidential candidates highlight opposing views with regard to the oil and gas sector; one supports the industry and the other is looking to accelerate the transition to cleaner energy alternatives.
October 20, 2020
ECONOMY
By Michael J. Bazdarich, PhD
Single-family housing starts rose a rousing 8.5% in September on top of a +1.7% revision to the August level, which now shows a 2.9% gain.
By Thea Okin
Municipals posted positive returns as yields trailed Treasuries lower. AAA municipal yields declined 1 bp across the curve, trailing Treasuries.
By Michael Kim
Health care remains a key topic heading into the presidential election, and the pandemic has drawn increasing attention to the gaps in our health care system regarding private insurance, government programs and varying levels of coverage. In this blog post we examine the potential changes to US health care coverage following the election.
By Michael J. Bazdarich, PhD
Retail sales rose 1.9% in September, extending a string of strong gains. In the five months since their shutdown-induced April low, retail sales have risen 33.1% and now stand 4.2% above pre-shutdown levels.
By Bonnie M. Wongtrakool
ESG assets have grown significantly, with US sustainable investments totaling $12 trillion at the end of 2018. This acceleration in ESG investing has not gone unnoticed by federal agencies, given the intersection between ESG, investment regulations and climate policy.
By Ivor Schucking, Sebastian Angerer
Our constructive secular view on major US banks is based on the following: (1) simpler, safer and stronger banks; (2) well-entrenched, lower-risk banking business models, and (3) a robust regulatory framework driven by Dodd-Frank in 2010.
By Robert E. Amodeo, Sam Weitzman
Municipals posted negative returns as yields moved higher in sympathy with Treasuries. AAA municipal yields increased approximately 3-10 bps across the curve, following Treasuries higher.
By Robert E. Amodeo, Michael Linko, Sam Weitzman
Infrastructure spending persists as a popular election issue, often viewed as an ideal solution to drive growth and visions of the future against a backdrop of aging roads, bridges and outdated utility systems.
By Andreas Billmeier, PhD
The US president holds a larger sway over international affairs than over domestic policy, which is often dominated by Congress. This simple fact is yet another reason that the upcoming election will be a crucial milestone.
October 07, 2020
STRATEGY
By Chia-Liang Lian
By most accounts, the macro shock emanating from the effects of COVID-19 has been profoundly acute across EM countries. During Q2, real GDP in non-China EM shrank at a staggering rate of 40% QoQ annualized.
By Robert E. Amodeo, Sam Weitzman
Municipals posted negative returns during the week but generally outperformed Treasuries. AAA municipal yields moved 2-5 bps higher across the curve.
By Michael J. Bazdarich, PhD
The US deficit on real merchandise trade widened slightly in August. Real exports rose 2.3%, compared to a 2.1% increase in real imports.
By Robert O. Abad
The 2020 pre-election rollercoaster ride is not over by any stretch of the imagination. Markets have been buffeted once again by another black swan event—this time, the breaking news that President Trump has tested positive for COVID-19.
By Michael J. Bazdarich, PhD
Private-sector payrolls gained 877,000 jobs in September, with a +40,000 revision to the August employment estimate. Press coverage this morning appears to be focusing on the 661,000 gain in total payroll jobs, which is said to have been below expectations.
September 30, 2020
MARKETS
By Anthony Kirkham
The Reserve Bank of Australia (RBA) continues to believe that fiscal support will be the main driver of the Australian economy in the medium term and we agree. But, at the same time, the central bank hasn’t stopped looking for ways to assist wherever possible.
By Fred Poon, Robert E. Amodeo
AAA Municipal yields were generally unchanged during the week. Muni technicals softened as intermediate- and long-term fund categories recorded outflows.
By Michael J. Bazdarich, PhD
Sales of new single-family homes rose another 4.8% in August, on top of 14.7%, 20.5% and 22.5% gains over the previous three months. In other words, new-home sales in August were 77.4% above the April low.
By Suzanne Trepp
Almost exactly six months ago, air travel as the public knew it changed forever due to the outbreak of COVID-19. The unprecedented closing of international borders, as well as quarantines and other “shelter-in-place” restrictions, caused global air travel demand to decline more than 90% at its nadir in April 2020.
September 22, 2020
MARKETS
By Judith Ewald
AAA Municipal yields were generally unchanged during the week. Muni technicals softened as inflows lowed amid an elevated new issue calendar.
September 17, 2020
MARKETS
By Harris A. Trifon
As we enter autumn with COVID-19 rates falling from their “summer surge,” the reopening process resuming, and amid mounting concerns about another spike in cases as the weather cools, we’re looking closely at the pandemic’s impact on commercial real estate and retail space specifically.
By John L. Bellows, PhD
The context for today’s Federal Open Market Committee (FOMC) meeting had a number of crosscurrents. On the one hand, the US economy has handily outperformed consensus expectations over the last few months.
September 16, 2020
ECONOMY
By Michael J. Bazdarich, PhD
Retail sales rose 0.6% in August, with that gain offset only partially by a -0.3% revision to July’s level. Sales excluding cars, gasoline and building materials (our “control” sales measure) also rose 0.6% in August, with a similar downward revision to July.
September 15, 2020
MARKETS
By Robert E. Amodeo, Dave Fare
AAA Municipal yields were mixed across the curve, underperforming Treasuries, as index returns grinded higher. The Senate failed to advance through Congress its stimulus bill, which provided limited support for municipalities.
By Jonathan Baird, Damon Shinnick
Many investors may be wondering whether there is any value left in domestic fixed-income markets. While outright yields may look tight on a historical basis, we contend that spread sectors still provide attractive risk-adjusted returns relative to cash and government bonds.
By Andreas Billmeier, PhD
In today’s meeting, the European Central Bank’s (ECB) Governing Council (GC) left all major policy levers unchanged and reaffirmed its commitment to ample monetary stimulus.
September 09, 2020
ECONOMY
By James J. So
Headlines seem to be popping up about corporate America choking on debt, fiscal and monetary support that creates zombie companies, and questioning why companies aren’t cutting debt in a downturn.
By Sam Weitzman
AAA Municipal yields moved 1-2 bps higher across the curve. The Bloomberg Barclays Municipal Index returned
September 04, 2020
ECONOMY
By Michael J. Bazdarich, PhD
The Bureau of Labor Statistics reported today that private-sector payroll jobs rose by 1,027,000 in August, with a slight upward revision to the July jobs estimate.
September 03, 2020
ECONOMY
By Richard A. Booth
Following up on our blog post about the long-term structural drivers of our inflation view, this post explores some of the shorter-term impacts to inflation due to the Covid crisis.
September 01, 2020
MARKETS
By Robert E. Amodeo, Judith Ewald
AAA Municipal yields moved 3-10 bps higher across the curve, trailing USTs. The Bloomberg Barclays Municipal Index returned -0.33%, while the HY Muni Index returned -0.39%..
By Jason Straker
When evaluating a money market fund, investors tend to look at characteristics that help them judge the attractiveness of a fund (e.g., cut-off time, yields and returns), including risk (e.g., weighted average maturity and life) and even the liquidity (e.g., size of the fund), but one factor often overlooked is the Net Asset Value per share, or NAV.
By Michael J. Bazdarich, PhD
The Census Bureau this morning released estimates of July activity in durable goods manufacturing. These estimates indicated that the sector continued to recover from the COVID shutdown in July.
By Robert E. Amodeo, Sam Weitzman
AAA municipal yields moved 7-10 bps higher during the week, underperforming USTs. The Bloomberg Barclays Municipal Index returned -0.31%, while the HY Muni Index returned -0.11%.
By Robert E. Amodeo, Rolf E. Lundelius, PhD
AAA municipal yields moved 7-9 bps higher across the curve during the week. Municipal/Treasury ratios declined below 100% across the curve for the first time since March volatility.
By Michael J. Bazdarich, PhD
The Census Bureau reported today that housing starts rose 22.6% in July, while the June figure was revised upward by 2.9% to show a 17.5% increase on top of an 11.1% increase in May.
By Michael J. Bazdarich, PhD
Headline retail sales rose 1.2% in July, with the estimate for June revised up by 1.0%. So-called “control” sales—excluding car dealers, service stations, building material stores, and restaurants—rose 1.4%, also with a 1% upward revision to June.
By Judith Ewald, Sam Weitzman
AAA municipal yields moved 7-10 basis points lower during the week, outperforming Treasuries and leading the Municipal/Treasury ratios lower to 69%-103% across the yield curve.
By Michael J. Bazdarich, PhD
Just as businesses and consumers have moved to shore up cash holdings (liquidity) in the last few months, so too the Treasury has built up massive amounts of cash holdings—more than $1.5 trillion worth of accumulation.
By Michael J. Bazdarich, PhD
Payroll jobs rose by 1.763 million in July, with private-sector jobs up 1.462 million.
By Robert E. Amodeo, Rolf E. Lundelius, PhD, Sam Weitzman
AAA municipal yields moved 6 bps lower across the curve, trailing Treasuries. Municipal mutual funds recorded a twelfth consecutive week of inflows, turning net flows positive for the year.
August 03, 2020
MARKETS
By Harris A. Trifon
As we wrote about recently regarding pandemic-driven changes to the office sector, the hospitality sector overall, and hotels specifically, must also adapt to the new environment or risk extinction.
By Michael J. Bazdarich, PhD
Real GDP contracted at a -32.9% annualized rate in 2Q2020, far and away the largest quarterly decline on record for the US.
By John L. Bellows, PhD
The Federal Reserve (Fed) changed very little in its official statement following today’s Federal Open Market Committee meeting.
By Judith Ewald, Robert E. Amodeo
AAA municipal yields moved 2-4 bps lower during the week, with longer-dated muni bonds underperforming Treasuries. The Bloomberg Barclays Municipal Index returned 0.44%, while the HY Muni Index returned 0.84%.
By Michael J. Bazdarich, PhD
New-home sales rose 13.8% in June, with a positive revision to May’s level.
By Thea Okin
AAA municipal yields moved 6-7 bps lower during the week, outperforming Treasuries and driving municipal-to-Treasury ratios lower.
By Michael J. Bazdarich, PhD
Retail sales continued to increase strongly in June, furthering their recovery from the COVID-induced shutdown that debilitated activity through April.
By Robert E. Amodeo, John Mooney
AAA municipal yields moved 3-10 bps lower during the week, outperforming Treasuries and driving municipal-to-Treasury ratios lower. The Bloomberg Barclays Municipal Index returned 0.50%, while the high-yield muni index returned 0.84%.
By Mark Hughes
As markets are currently coping with conflicting headlines of buoyant markets, viral outbreaks and a choppy economic restart, the Western Asset Coronavirus Task Force wanted to share our take on the resurgent growth of COVID-19 in the US as well as the outlook for emerging markets (EM).
By Sam Weitzman, Robert E. Amodeo
AAA municipal yields were generally unchanged during the quiet, holiday-shortened week, and outperformed Treasuries, which moved higher in intermediate and long maturities.
By Amit Chopra
Ever since the Federal Reserve broached the subject of average inflation targeting and price level targeting in early 2019, the market has been waiting for some guidance on what it all means for monetary policy.
By Michael J. Bazdarich, PhD
Total payrolls rose by 4.800 million in June, with the May estimate revised upward by 90,000.
By Michael Linko
AAA municipal yields were generally unchanged during the week, as an elevated supply calendar paired with uncertainty around the implications of rising COVID-19 infections kept munis from keeping pace with the Treasury rate rally.
By Michael J. Bazdarich, PhD
In the past three months, we have seen extraordinary policy initiatives from both the Federal Reserve (Fed) and the federal government (feds), so much so that in a post here a few weeks ago, we argued that policy had already done as much as it could do and should cease further stimulative activity. In many folks’ minds, the Fed has already done too much, and they believe a bout of substantially higher inflation is coming to the US.
By Michael J. Bazdarich, PhD
Consumer spending registered some nice gains in May, following two months of cataclysmic declines.
June 24, 2020
MARKETS
By Thomas V. McMahon
Rating actions have come fast and furious over the past few months.
By Sam Weitzman, Robert E. Amodeo
Municipal market yields moved modestly higher amid heavy new-issue volume.
By Sam Weitzman, Robert E. Amodeo
Municipal market returns grinded higher last week, supported by strong flows into municipal mutual funds and seasonally high coupon and principal reinvestment which offset an elevated calendar. This week we take a deeper dive into jobs data associated with COVID-19 economic impacts to assess varying degrees of austerity at the state and local levels.
By Michael J. Bazdarich, PhD
Retail sales registered a 17.7% gain in May, with April’s sales revised up by 2.1% from the level announced a month ago. We focus on a “control” sales measure that excludes sales at vehicle dealers, service stations and building material stores.
By Gordon S. Brown
June was already shaping up to be an interesting month for UK markets given the latest round of trade talks between the UK and EU, and the upcoming July 1 deadline to agree on an extension to the “transition period”.
By Michael J. Bazdarich, PhD
The Consumer Price Index (CPI) declined 0.1% in May, with the core CPI declining by the same amount. These slight declines were a moderation from the sharper declines seen in March and April, when the COVID-induced economic shutdown was first taking effect. We have seen an apparent bottoming of economic activity in May, and the CPI news is in line with that.
By Sam Weitzman, Robert E. Amodeo
Welcome to the inaugural edition of the weekly Western Asset Municipal Monitor. Given the recent market volatility and ever-changing market conditions, we hope this new publication will provide muni investors with relevant and useful content.
By Desmond Soon
This blog post features a series of charts with brief commentaries to describe each graphic; in total we think the charts present a comprehensive update regarding the economic progress North Asia is making on the road to a rebound after suffering the economic effects of the COVID-19 lockdowns/social distancing.
June 05, 2020
ECONOMY
By Michael J. Bazdarich, PhD
Well, that was a nice surprise! Financial markets were bracing themselves for another 8 million jobs lost in May.
By Andreas Billmeier, PhD
In today’s meeting, the European Central Bank’s (ECB) Governing Council resolved to further expand its monetary accommodation by enlarging the Pandemic Emergency Purchase Programme (PEPP) by €600 billion, lengthening its duration by six months to at least the end of June 2021, and committing not to reverse the effect of those PEPP purchases until at least end-2022.
June 03, 2020
ECONOMY
By Michael J. Bazdarich, PhD
We argue here that the Federal Reserve (Fed) and federal government (feds) have already done as much as they can do to assuage the effects of the COVID-19 economic shutdown.
By Michael J. Bazdarich, PhD
New orders for durable goods declined 17.2% in April, following a 16.6% decline in March.
By Quentin Lafosse, Wilfred Wong
In this blog post we discuss the dislocations to the emerging market (EM) asset class generated by the coronavirus pandemic and assess the fundamental shift in liquidity for both local currency and hard currency bonds.
May 26, 2020
STRATEGY
By Dean French
Despite its typically low volatility and high credit quality profile, the European supranational bond market has not been immune from whipsawing market moves seen across all asset classes.
May 26, 2020
MARKETS
By Harris A. Trifon
The unprecedented closure of large swaths of the US economy related to the COVID-19 pandemic has contributed to an enormous amount of stress on tenants, property owners and lenders alike.
By Judith Ewald, Thea Okin
Despite the tremendous challenges states face in combatting COVID-19, we believe they will survive—given the combination of healthy reserves, federal support and robust management tools that should enable even the most troubled states to prevail during this unprecedented pandemic.
May 20, 2020
MARKETS
By Robert O. Abad
Lately, clients have been asking which asset class offers the best return prospects over the next 12-18 months: equity or credit? This is a fair question.
By Michael J. Bazdarich, PhD
Total housing starts dropped 30.2% in April, with single-family starts down 25.4%. Those plunges were only slightly offset by 4.9% and 1.8% upward revisions to the March estimates for total and single-family starts, respectively.
By Annabel Rudebeck
As the dust settles after the enormous market volatility in March and April, we are all having to reset our expectations for asset class returns.
By Michael J. Bazdarich, PhD
Retail sales declined 16.4% in April on top of an 8.3% decline in March, for a 23.3% cumulative drop across the two months.
By Andreas Billmeier, PhD, Richard A. Booth
This blog post focuses on our portfolio strategy with respect to Italian sovereign holdings. We begin by providing some background information then assess the current market opportunities.
By Bonnie M. Wongtrakool
As we claw out of the rubble from the pandemic, it is increasingly clear that we will not suddenly resume our pre-COVID ways of life.
By Andreas Billmeier, PhD, Richard A. Booth
Italy has been in focus recently for several reasons: the dramatic human impact of the early outbreak of COVID-19, the equally dramatic social and fiscal policy measures taken by its government in response to the economic impairment and, finally, the wild swings in its bond prices.
May 08, 2020
ECONOMY
By Michael J. Bazdarich, PhD
We empathized with the young John Connor when surveying today’s April payroll jobs data. No, not every job in the economy was lost last month.
By Sebastian Angerer, Ivor Schucking
US bank stocks have lost almost half of their value in 2020 due to the negative economic impact of COVID-19 and the resulting hit to shareholder payouts as well as the expected diminished earnings power of banks in a lower interest rate environment going forward.
April 30, 2020
ECONOMY
By Andreas Billmeier, PhD
At today’s ECB meeting, the Governing Council took several additional measures geared at avoiding or at least limiting a potential credit crunch.
By John L. Bellows, PhD
The Federal Reserve (Fed) did not announce any significant change to its policies at today’s Federal Open Market Committee (FOMC) meeting.
By Michael J. Bazdarich, PhD
Real gross domestic product (GDP) was reported today as declining at a 4.8% annualized rate. Crazily enough, this sharp decline was right in the middle of an extremely wide range of expectations.
April 27, 2020
ECONOMY
By Richard A. Booth
Last month, we discussed how we think depressed inflation for the next 10 years is very unlikely. Here, we check in on inflation rates given the latest data.
By Alan Nadel, Alex Warren
The current decline in economic activity suggests that there may be a material uptick in corporate issuer downgrades.
April 22, 2020
MARKETS
By Michael Linko
In the not too distant past, long lines at airport checkpoints, miles of roadway traffic jams and packed subway cars and buses were an all-too-common, if frustrating, part of American life.
April 16, 2020
MARKETS
By J. Gibson Cooper, René Ledis
Over the weekend, OPEC+ finally reached a production cut agreement after Mexico initially held out and caused some nervous moments.
By Chia-Liang Lian, Kevin X. Zhang
When it rains it pours, as the saying goes. This week’s quarterly release of macroeconomic forecasts by the IMF presents an unequivocally bleak near-term outlook for EM economies.
By Kevin J. Ritter, Mark Hughes
In recent weeks, emerging markets have had to cope with the dual shocks of coronavirus/COVID-19 containment measures and the breakdown of OPEC+ negotiations.
By Andreas Billmeier, PhD
We think that last week’s economic response package in Europe does not quite go far enough to count as “true” fiscal solidarity, but a limited, jointly financed Recovery Fund can go a long way to overcome the standard criticism of “just another European fudge” while harnessing country-level efforts to provide a broader public good in the form of a European recovery.
By Anthony Kirkham
Governments and central banks around the world have responded to the economic implications of COVID-19 by rolling out unprecedented monetary and fiscal policy responses.
March 31, 2020
MARKETS
By John L. Bellows, PhD
In mid-March, the Treasury market went through a period of severe illiquidity. As we discussed in our webcast two weeks ago on the Fed’s role, illiquidity in the Treasury market was apparent in a number of ways.
By Chetna Mistry
For as long as we can remember, primary markets for European investment-grade securities have never had a standardised process. This has often led to anguish regarding information dissemination on book size, security set ups, obtaining a prospectus, identifying ISINs and other issues. The list is endless.
By Paulo Clini, Adauto Lima
Similar to other countries, Brazil is bracing for an impact from COVID-19 that could be even worse than what its economy experienced as a result of the 2008 great financial crisis (GFC).
By Douglas Wade
Since the beginning of the year and with the onset of the global coronavirus outbreak, inflation expectations have plummeted.
By Michael J. Bazdarich, PhD
For the last two weeks plus, the Federal Reserve has been feverishly announcing policy initiatives intended to stem panic in the financial markets and in the economy.
By Robert E. Amodeo, Sam Weitzman
During this period of market volatility, investors should recall the quality, diversification and tax-exempt benefits of a municipal allocation.
By Anthony Kirkham
On March 18, we mapped out our expectations for the Reserve Bank of Australia’s (RBA) announcement that was to occur the following day. We were of the belief that the RBA was “ready to walk the talk” and we (along with the markets) were not left wanting.
By Jason Straker
With the onset of the COVID-19 crisis the Federal Reserve (Fed) has been swift to introduce a variety of measures to support different areas of the financial markets, including the money market fund (MMF) industry.
By Andreas Billmeier, PhD
Economic and social policy responses to the coronavirus/COVID-19 outbreak have led us to believe that Europe will find itself in a recession soon.
By Sebastian Angerer, Ivor Schucking
Global banks have not been spared by the COVID-19/coronavirus-induced fears of a global economic recession and a potential repeat of the 2008 global financial crisis. We believe that bank stakeholders have learned from the painful lessons of the past and memories of the great financial crisis (GFC) remain very much alive.
March 18, 2020
MARKETS
By Anthony Kirkham
Reserve Bank of Australia (RBA) Governor Philip Lowe released a statement on 16 March outlining the RBA’s intention to purchase Australian Government Bonds in the secondary market.
By Greg Handler, Ion Dan
Aggregate US consumer fundamentals remain strong and stable for the time being, even as the effects and risks of COVID-19 continue to grow rapidly.
March 17, 2020
MARKETS
By J. Gibson Cooper, René Ledis
This year is off to a tumultuous start to say the least, with volatility increasing in commodity markets. Leaving 2019 there was a semblance of stability creeping in that was welcomed by commodity markets.
By John L. Bellows, PhD
Yesterday the Federal Reserve held an unprecedented Sunday meeting to announce a new round of measures to address the current economic emergency.
By Sam Weitzman
Western Asset’s Municipal Portfolio Management Team is actively coordinating with the Firm’s coronavirus/COVID-19 task force to assess the spread and magnitude of the virus within the US.
By Andreas Billmeier, PhD
After a somewhat underwhelming G-7 statement promising cooperation but not much more, the Federal Reserve moved quickly (as discussed by my colleague John Bellows) to cut the target range for the fed funds rate by 50 bps in an emergency meeting.
By Porntawee Nantamanasikarn, PhD
The first two months of 2020 saw outsized moves in both US Treasury (UST) yields and US credit spreads, driven by the coronavirus/COVID-19 outbreak and its significant impact on the global economic growth outlook.
March 03, 2020
MARKETS
By John L. Bellows, PhD
Today the Federal Reserve cut its benchmark interest rate by 50 bps. The FOMC’s accompanying statement said that the committee is “closely monitoring” developments and will “act as appropriate” going forward.
February 28, 2020
MARKETS
By Robert O. Abad
As we closed 2019, market expectations were high that we would finally see a budding global recovery gain more traction following a string of positive developments: a US-China phase one trade deal, the dissipation of a “hard” Brexit scenario, more aggressive easing from both developed and emerging market central banks, and green shoots in a number of non-US markets such as Europe.
February 27, 2020
CREDIT
By Walter E. Kilcullen
As equities continue to sell off and credit spreads widen from historically full valuations, the coronavirus/COVID-19 outbreak and related fears of a longer than anticipated containment period and greater scope of impact remind investors just how important it is to do the work.
By Chia-Liang Lian, Kevin X. Zhang
Investor attention to the ongoing outbreak of a respiratory disease, first referred to as coronavirus and now as COVID-19, has intensified this week.
By Vidhu Aggarwal
The tax-exempt municipal bond market is one of the largest debt sectors in the US, with a credit history of low defaults, compelling diversification benefits and excellent risk-adjusted returns.
By Kurt Halvorson
After a blockbuster year for holders of US investment-grade (IG) credit (corporate bonds), investors are left staring at tighter spreads and lower all-in yields, scratching their heads wondering where the returns will come from in 2020.
By Harris A. Trifon
With interest rates hovering around all-time lows in the US, the balance sheet of the average US consumer is generally stronger as lower rates reduce the cost of debt servicing.
February 05, 2020
MARKETS
By Dean French
In early January, Spain’s parliament approved Pedro Sánchez’s return as Prime Minister, leading a coalition government of his Spanish Socialist Workers’ Party (PSOE) and the left-wing populist Podemos group.
By Desmond Soon
This blog post is an attempt to address the evolving developments emanating from the Wuhan coronavirus in China and its impact on the global economy.
January 28, 2020
MARKETS
By Ryan Kohan
With Western Asset’s outlook for 2020 calling for US growth to remain steady, improving domestic conditions in the eurozone and an acceleration in EM growth, one might expect spread sectors to remain favorable this year.
January 14, 2020
ECONOMY
By Amit Chopra
Trade wars, cross-border tension and populism were all in the forefront in 2019.
By Rafael Zielonka
Foreign exchange (FX) volatility has drifted lower given the prevailing environment of relative stability, and remains subdued when compared with historic levels. Some market participants have described overall FX volatility as cheap, but we disagree.
December 31, 2019
MARKETS
By Gordon S. Brown
In August we wrote that financial markets were overpricing the risk of a ‘no-deal’ Brexit and our view was that such an outcome would be avoided. Within the range of alternative scenarios, our central case was that the UK would leave the EU with a revised deal.
By Bonnie M. Wongtrakool
In March 2018, the European Commission released its Action Plan on Sustainable Finance, an ambitious 10-point agenda designed to direct private capital toward the EU’s climate action and sustainability goals.
By Alex Warren, Alan Nadel, PhD
Are we about to witness a new generation of bond issuance that will take a full century to mature? The concept of a bond that matures in 100 years is challenging for many US investors to comprehend, with perhaps the exception of life insurers.
By Andreas Billmeier, PhD
Notwithstanding a few wobbles, Christine Lagarde managed to navigate her first press conference as ECB President largely unscathed.
December 11, 2019
ECONOMY
By John L. Bellows, PhD
The headlines after today’s Fed meeting will surprise no one. The FOMC left rates unchanged, indicated that it views current policy as “appropriate,” and its dots showed no change in rates for at least the next twelve months.
By Andreas Billmeier, PhD
In this two-part blog post, we look at German fiscal policy—what is changing, what needs to change, and by when.
November 20, 2019
MARKETS
By Chia-Liang Lian, Steven T. Saruwatari
A longstanding theme of emerging markets (EM) investing is premised on supportive secular factors. In the decade prior to the Fed Taper Tantrum of May 2013, EM assets had enjoyed an uninterrupted episode of robust performance. During this period, USD-denominated sovereign debt returned a handsome 9.5% per annum, while local currency government debt posted an eye-popping gain of 11.4% per annum, according to the JPMorgan EMBIG and GBI-EM indices. What was the critical impetus that helped EM debt to assert itself as an asset class?
By Robert O. Abad
Civil disobedience turned violent. Government leaders forced to flee. Investors caught off-guard by a wave of social unrest sweeping across a number of countries. Such moments bring to mind the Arab Spring—a transformational time beginning in Tunisia in 2010 and that had long-lasting ramifications on growth, politics and society across much of the Islamic world, including protest, violent power struggles, Sectarianism, collapse of state systems, a second Arab Spring and ongoing conflict.
By Mark Hughes
In today’s low-growth, low-inflation global economy, it has been challenging for retail investors to find income for their portfolios. With approximately 25% of global fixed-income trading with negative yields and US credit spreads nearing cycle lows, traditional bond products no longer offer the yields they once did.
By Sean Johnson
Western Asset has been active in the non-QM market for a number of years and in the past two years alone we have securitized $3.5 billion of loans. We continue to be active in the market, as we add select new originators and purchase more loans with the intent to securitize them.
By Robert O. Abad
With more bonds drifting into negative yield territory, are income-generating opportunities going the way of the dinosaur?
October 23, 2019
ECONOMY
By Adauto Lima, Paulo Clini
The current GDP rebound has been unambiguously underwhelming by historical standards in Brazil. Recent activity data continued to disappoint analysts, including us. Over the course of the past year, we have sequentially revised downward our 2019 GDP growth forecast to 0.8% from 1.9%.
By Andreas Billmeier, PhD
In a two-part blog post, we take a look at German fiscal policy—what is changing, what needs to change, and by when.
October 01, 2019
MARKETS
By Annabel Rudebeck
It has been well telegraphed that European government bonds are negative-yielding across countries and tenors. In this post we look at the impact of negative-yielding government bonds on corporate bonds, considering both the market dislocations caused as well as the fundamental impacts.
By Vidhu Aggarwal
Technology is revolutionizing public finance and the municipal business by reshaping the way fiscal policies and municipal projects are designed and implemented.
By Kevin Ehrlich
Part I of this post addressed five myths and practice challenges for investment advisers. Here in Part II, we continue the discussion and address five more myths.
September 23, 2019
ECONOMY
By Kevin Kennedy
A dollar funding shortage hit markets last week as a perfect storm of factors combined to expose an insufficient quantity of cash in the system, creating severe upward pressure on overnight funding rates.
By Kevin Ehrlich
At Western Asset, we regularly exchange best practices and industry observations with our clients and colleagues that collectively can help address operational and regulatory challenges in the investment industry. This post highlights a handful of common misconceptions and practice challenges for investment advisers and political contributions they and their staffs make.
By Andreas Billmeier, PhD
Today, the European Central Bank (ECB) adopted a comprehensive package of measures geared at bringing the inflation outlook back in line with its 2% target.
By Quentin Lafosse
Notwithstanding their undeniable economic linkages, Poland and core eurozone countries, in particular Germany, have experienced meaningfully divergent growth over the last two years.
August 27, 2019
MARKETS
By Ryan Kohan
Many of the recent headlines about leveraged loans have highlighted the 40-week streak of retail fund outflows from the loan asset class, according to Lipper. The outflows have been driven by investors’ views that rates will continue to fall.
By Jason Straker
For investors in money market funds, this environment of higher-than-average interest rate volatility leads to the fundamental questions: how do managers think about rates and how do their views impact their funds’ investors?
By Gordon S. Brown
UK Prime Minister Boris Johnson recently characterized the chances of a no-deal Brexit as 'vanishingly small' and 'a million-to-one against'. However, betting markets are of a different view.
By Amit Chopra
These are interesting times in bond markets. Around $15 trillion of government bonds worldwide now trade at negative yields and this number keeps growing.
August 13, 2019
CREDIT
By Kurt Halvorson
Fixed-income investors face a variety of questions; among them perhaps none is more important than the question of risk and reward.
August 12, 2019
MARKETS
By Michael C. Buchanan, Robert O. Abad
The expansion phase of the current global credit cycle has been going for 10 years. Many say it’s ending.
By Jie Peng
Offshore debt issuance by Chinese State-Owned Enterprises (SOEs) has witnessed a phenomenal rise, making it too significant to ignore.
By Desmond Soon
The Hong Kong economy is very externally oriented and open, with foreign trade in goods and services equivalent to around three times its GDP. Therefore, it is important for Hong Kong to maintain a stable exchange rate.
By John L. Bellows, PhD
The Federal Reserve (Fed) cut its benchmark interest rates by 25 bps yesterday and ended its balance sheet reduction two months ahead of schedule. Both moves were widely anticipated.
By Harris A. Trifon
Over the last few years commercial real estate (CRE) collateralized loan obligations (CLOs) have moved from the fringes of the securitization market and now are entering the mainstream.
By Chia-Liang Lian, Kevin J. Ritter, Quentin Lafosse
EUR-denominated debt issued by emerging market (EM) countries/companies is asserting its place in the evolution of the asset class.
By Thea Okin
Responsible investing, when combined with strong performance, is a powerful way to impact society while meeting investors’ specific goals. It can be a true win-win situation.
By Swee Ching Lim
A proliferation of debt issuance by myriad financial institutions in China in recent years has led to increased market visibility.
By Nathalie Cuadrado
This month the UK government announced its Green Finance Strategy aimed at reducing net greenhouse gas emissions to zero by 2050, a step change from the 2008 Climate Change Act which had set goals to reduce emissions by 80% by 2050.
By Sean Rogan
On the 9th July 2019, the Australian Prudential Regulation Authority (APRA) released its final decision on the form of capital that will make up part of the Total Loss Absorbing Capital (TLAC) for its domestic systemically important banks (D-SIBs), which comprise the four major Australian banks.
By Mark Hughes
Emerging market (EM) corporate bonds have come a long way over the past 15 years—from a handful of investment-grade-rated issuers to a full-blown asset class with approximately $1 trillion of outstanding bonds.
By Bonnie M. Wongtrakool
The effect of environmental, social and governance (ESG) factors on investment returns is a perennial, albeit evolving, topic in the investment community.
July 09, 2019
INVESTING
By Cel Sibley
Girls Who Invest is a non-profit organization dedicated to increasing the number of women in portfolio management and executive leadership in the asset management industry.
By Andreas Billmeier, PhD
In a “package deal” to fill a number of top positions in Europe, European leaders have recommended International Monetary Fund (IMF) Managing Director Christine Lagarde to succeed Mario Draghi as President of the European Central Bank (ECB) in November.
July 03, 2019
ECONOMY
By Lawrence Daly
The Reserve Bank of Australia (RBA) cut rates by 25 bps to 1% at their July meeting. This is not only the record low for the bank, but the first consecutive cut in interest rates in Australia since 2012.
July 02, 2019
ECONOMY
By Andreas Billmeier, PhD
Following Draghi’s “whatever it takes” speech in 2012, the ECB enhanced its toolbox with unconventional policy measures in addition to introducing negative interest rates in 2014.
July 01, 2019
ECONOMY
By Matthew D. Jackson
European credit investors seem increasingly comfortable throwing themselves off the balcony, safe in the knowledge that the ECB’s magic carpet will spare them from harm.
By Robert O. Abad
For now, the US has stated that trade talks are “back on track”; it will suspend the 25% tariffs on the remaining $300 billion of imports from China and it agreed to lift US supplier restrictions on Huawei (a focal point in the negotiations).
By John L. Bellows, PhD
The Fed did not cut rates or change its balance sheet policy yesterday, but that hardly mattered. The Fed was dovish in every other way that counts, from the statement to the dots to the press conference.
By Desmond Fu
The secular re-rating of the Indonesian sovereign over the last two decades has been nothing short of spectacular.
By Suzanne Trepp
Historically, the most senior positions at asset managers have been overwhelmingly dominated by men, who represent approximately 50% of the population, but hold more than 90% of senior roles at “buy-side” firms.
By Gordon S. Brown
Since the great financial crisis roughly 10 years ago, investors are conditioned to expect the unexpected, but as long-term value investors, we at Western Asset still firmly believe that ultimately, macroeconomic fundamentals prevail and are the key determinant of valuations.
By Mike Borowske
For the better part of the last two years, Western Asset has held a cautious view of the automotive space. While there are positive attributes we can identify, the industry has been under siege for the last 18-24 months.
By Kevin J. Ritter
Western Asset views high-grade emerging market (EM) debt as a “must have” allocation for insurance assets. As an asset class, EM debt is prone to suffering from the problem of perception.
By Sebastian Angerer
The decline in oil prices has been a catalyst for fueling a surge in debt issuance in the Middle East in recent years. As background, the Arab Spring earlier this decade prompted an increase in government spending by the six-member countries of the Gulf Cooperation Council (GCC), comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
By Chia-Liang Lian, Kevin J. Ritter
Last night, President Trump announced via Twitter that on June 10 the US would impose a 5% tariff (with the potential for further increases) on all goods coming into the US from Mexico until the “illegal migrants” transiting through Mexico into the US are stopped.
By Kurt Halvorson
Over the past 18 months, investors in the US credit markets have faced a variety of dark clouds as they attempt to navigate this new age of headline driven volatility.
By Paulo Clini, Adauto Lima
Western Asset recently cut our 2019 GDP growth outlook for Brazil to 1.3% from 1.9%. The move came on the back of weaker-than-expected data for 1Q19, and underscores the frustratingly sub-par pace of expansion over the last three years.
By John L. Bellows, PhD
Last week the US again increased tariffs on certain Chinese imports. This was the third round of tariffs on Chinese imports in the last 18 months, following announcements in 2018 of 20% tariffs on Chinese washing machines and solar panels, and 10% tariffs on $200 billion of select imports.
By Mark Hughes
Emerging markets debt is a growing and diverse asset class that allows participants to invest in over 70 different countries globally. While this breadth presents investors with opportunities for both diversification and yield enhancement in their portfolios, it also comes with potential credit risk and information asymmetry.
May 14, 2019
ECONOMY
By Amit Chopra
Despite massive monetary easing by developed market central banks since the great recession, inflation has failed to emerge. Falling inflation expectations are now becoming a concern.
May 10, 2019
ECONOMY
By Michael C. Buchanan
About a year and a half ago, investors started to get concerned about the significant growth in BBB rated debt issues, which represent the lowest rung of investment-grade (IG) credit. Today, BBBs comprise nearly 50% of the IG market, which has more than doubled since the financial crisis 10 years ago.
May 08, 2019
ECONOMY
By Chia-Liang Lian
The most recent tariff threats against China have scuttled a trade deal that was to be announced on May 10. President Trump plans to raise tariffs on $200 billion of Chinese imports to 25% from 10% effective this Friday, May 10.
May 06, 2019
INVESTING
By Bonnie M. Wongtrakool
Many investors that initiated due diligence on ESG out of curiosity or in response to stakeholder pressure are now taking steps to invest in a future that is not only wealthier but also healthier and cleaner.
By Greg Handler
Price growth in the US housing market has decelerated in recent months after facing increased headwinds of reduced affordability and higher mortgage rates throughout the latter part of 2018.
By Wontae Kim
General elections in India officially kicked off on April 11 and will stretch out over six weeks in seven rounds of voting, with results expected to be announced on May 23. All 543 elected Members of Parliament (MPs) will be elected from single-member constituencies using the “first-pass-the-post” electoral system.
By J. Gibson Cooper, René Ledis
Despite recent downward revisions to economic growth forecasts, oil prices have held up well. Why is that?
By Sean Rogan, Paul Svoboda
Broadly, we consider current mortgage loan quality within the Australian banking sector to be at historically high levels, and arrears near cyclical lows. The most recent data includes reporting by the banks, plus Standard & Poor’s RMBS Performance Watch as of December 31, 2018.
By Judith Ewald
In a surprising and possibly precedent-setting decision in January, a ruling was made that Puerto Rico did not have to pay the special revenue bonds issued by its Highways and Transportation Authority.
By Robert E. Amodeo
Much has been said lately about the flatness of the yield curve. Municipal bonds, with their own peculiar yield curve, have also exhibited remarkable flatness in recent months.
April 17, 2019
ECONOMY
By Chia-Liang Lian
This week’s 1Q19 GDP report for China showed that the economy grew 6.4% year-over-year, the same pace as the previous quarter and matching the post-Lehman low in 1Q09. Nonetheless, the outcome surprised on the upside (consensus 6.3%).
April 16, 2019
MARKETS
By Desmond Soon
The Republic of Indonesia goes to the polls on Wednesday, April 17, to elect a President, Vice President and Members of Parliament. Indonesians based overseas have already voted in droves at foreign voting centers, but on Wednesday 193 million Indonesians will cast their ballots in more than 80,000 polling stations spread across this vast archipelago of 17,000 islands.
April 12, 2019
ECONOMY
By Michael J. Bazdarich, PhD
Last year, the Fed spent a lot of time and effort arguing that it needed to raise interest rates to get them back to “neutral” levels, to where they were no longer stimulating the economy. While stock market and global growth concerns have put this issue on the back burner, it is sure to resurface again soon.
By John L. Bellows, PhD
Herman Cain clearly has President Trump’s confidence, but it’s yet to be seen whether a more skeptical Senate will vote for his confirmation to the Federal Reserve Board (the Fed Board). The prospects for Mr. Cain’s confirmation are in constant flux.
By Ahmet E. Kocagil, PhD
Western Asset firmly believes that a strong risk management culture is fundamental to a successful investment management record. As Benjamin Graham once said, “the essence of investment management is the management of risks, not the management of returns.”
April 03, 2019
MARKETS
By Gordon S. Brown
So this is what happens when you leave it to UK Parliament to decide! With the government repeatedly failing to secure a majority for the Brexit deal it agreed to with the EU, on Monday Parliament “took control” of the political agenda to try and find common ground on the way forward.
By Amit Chopra, Julien Scholnick
Discussions about an inverted yield curve—and whether it portends a recession—are back in the spotlight. Of particular interest is the spread between 3-month T-bills and 10-year USTs, as this curve went negative on March 23.
March 26, 2019
MARKETS
By Robert O. Abad
Three storylines dominate today’s financial headlines: slowing global growth, rising debt levels and the extended credit cycle. Perhaps they’ve convinced you that an imminent crisis is lurking around the corner.

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