Capital Markets Weekly Update - Leumi USA

Capital Markets Weekly Update

Macro Commentary: 

This past Friday, Nonfarm Payrolls increased by 1371k, in line with expectations. The unemployment rate was 1.4% lower than expectations at 8.4%. These employment numbers continue to reflect growth from the peak of joblessness in April, which was nearly 15%.

Today, Senate Majority Leader said that he will be preparing a vote on the Congress floor for a newer, smaller version of a virus stimulus bill that targets some of the most urgent issues regarding healthcare, education, and the economy. Senate Democrats are expected to block the bill.

The first day after the Labor day weekend often marks the return to school for many students, but methods of return to school during a pandemic period greatly vary between states and districts. In NYC, only staff returned to building today, while limited in-person instruction will be available for students beginning September 21st

Fixed Income Market:

As expected, the week leading up to Labor Day was a quiet one in the fixed income markets.   Despite the heavy sell off in equities, fixed income spreads remained mostly unchanged and at the tightest we’ve seen since February pre-COVID levels.  The new issue market also took a breather with very light volumes and no notable deals.  The markets are tightly focused on both the November elections (now 56 days away), and the first Presidential debate which is just 3 weeks from today.  We expect to see a widening in credit spreads if the selloff in equities continues. 

 Lipper Fund flow data for the week showed:       

Domestic Equity Funds   down $8.9 BLN

      IG Bond Funds                     up     $10.7 BLN

      HY Bond Funds                    up     $319 MLN 

      Municipal Bond Funds      up      $600 MLN

      MMKT Funds                     down   $4.1 BLN

Prior Week: 

      Domestic Equity Funds   down $6.0 BLN

      IG Bond Funds                     up     $6.0 BLN

      HY Bond Funds                    up     $1.4 BLN 

       Municipal Bond Funds      up      $1.0 BLN

      MMKT Funds                     down   $4.6 BLN

U.S Equities:

The string of weekly gains was ended last week as all three major indices suffered pull-backs.  Tech led the way lower with NASDAQ off 3.25%. S&P 500 and DJI followed being lower by 2.27% and 1.73% respectively.  The move was broad based with 9 out of 11 sectors finishing the week negative.  Utilities and Materials were modestly higher and Communication Services and Energy were the big losers.   Rush to value stocks was a theme as well with Russell 1000 Value Index down .3% vs Russell 1000 Growth Index off by 3.4%.   The CBOE Volatility Index, considered by many as a fear gauge in the market, spiked to 30.7, the highest level since early July.  

Foreign Exchange:

The currency markets are returning to a shortened week after the Labor Day holiday.  

The dollar is stronger to begin the week as it has rebounded from the lows traded last week due to month-end rebalancing. Positive employment data out of the U.S. has been the catalyst for the recent move higher in the dollar. U.S. interest rates remaining at or below current levels and continued delays to the fiscal stimulus could weigh on the U.S dollar in the coming weeks.

Last Week's Economic Data September 8th

Last Week's Economic DataActualSurvey
New Home Sales790k901k
Durable Goods Orders11.2%4.8%
GDP Annualized QoQ-31.7%-32.5%
Initial Jobless Claims1006k1000k
Wholesale Inventories MoM-0.1%-0.9%
This Week's Economic DataRelease DateSurvey
Factory Orders9/02/206%
Durable Goods Orders9/02/2011.2%
Initial Jobless Claims9/03/20950k
Trade Balance9/03/20-$58.0b
Change in Nonfarm Payrolls9/04/201390k
Unemployment Rate9/04/209.8%

This Week's Economic Data September 8th

Interest RatesCurrentWoWMoMYoY US Swap SpreadsCurrentWoWMoMYoY
1 Month Libor0.16%(1.8 bp)(1.0 bp)(195.5 bp)12-Month+12 bp+1.0 bp+1.1 bp+8.6 bp
3 Month Libor0.24%(0.9 bp)(2.7 bp)(188.3 bp)2-Year+9 bp+2.1 bp+1.7 bp+8.6 bp
6 Month Libor0.31%(0.5 bp)(0.8 bp)(172.5 bp)3-Year+9 bp+2.8 bp+2.3 bp+11.8 bp
12 Month Libor0.45%+0.4 bp(1.5 bp)(150.4 bp)5-Year+7 bp+2.4 bp+2.0 bp+13.6 bp
Fed Funds Effective0.09%(1.0 bp)(203.0 bp)7-Year+0 bp+0.7 bp+1.7 bp+12.7 bp
SOFR0.07%(3.0 bp)(205.0 bp)10-Year+1 bp+8.4 bp+16.2 bp+70.0 bp
US Treasury YieldsCurrentWoWMoMYoY30-Year(38 bp)+13.0 bp+29.4 bp+91.7 bp
12-Month0.12%(0.5 bp)+1.0 bp(164.6 bp)Equity MarketsCurrentWoWMoMYoY
2-Year0.13%(2.0 bp)+2.6 bp(137.3 bp)Dow Jones 28,430 (0.8 %)+7.6%+7.7%
3-Year0.15%(2.9 bp)+3.2 bp(128.0 bp)S&P 500 3,500 (0.2 %)+7.0%+19.6%
5-Year0.27%(1.5 bp)+6.3 bp(111.9 bp)NASDAQ 11,775 +0.7%+9.6%+47.9%
7-Year0.49%+2.7 bp+10.7 bp(96.2 bp)CurrenciesCurrentWoWMoMYoY
10-Year0.70%(2.0 bp)+2.6 bp(137.3 bp)Euro1.1932+1.2%+1.3%+8.8%
30-Year1.47%(2.0 bp)+2.6 bp(137.3 bp)Japanese Yen105.8900+0.1%(0.1 %)+0.3%
US Swap Rates vs 3MLCurrentWoWMoMYoYBritish Pound1.3365+2.3%+2.1%+10.8%
12-Month0.23%+0.5 bp+2.1 bp(156.0 bp)Canadian Dollar1.3046+1.3%+2.8%+2.1%
2-Year0.22%+0.1 bp+4.2 bp(128.7 bp)Australian Dollar0.7373+2.9%+3.2%+9.8%
3-Year0.23%(0.1 bp)+5.5 bp(116.2 bp)Swiss Franc0.9041+0.9%+1.0%+9.6%
5-Year0.33%+0.9 bp+8.3 bp(98.4 bp)Israeli Shekel3.3544+1.5%+1.5%+5.5%
7-Year0.49%+3.4 bp+12.3 bp(83.5 bp)Bitcoin 11,708 (0.2 %)+3.2%+12.5%
10-Year0.71%+6.4 bp+18.8 bp(67.3 bp)CommoditiesCurrentWoWMoMYoY
30-Year1.09%+11.0 bp+32.0 bp(45.6 bp)Gold 1,969 +2.1%(0.3 %)+29.5%
Silver28+5.9%+15.6%+53.4%
Copper303+3.7%+5.8%+19.8%
Crude Oil43+0.4%+6.3%(22.3 %)
Ariel Segal | Treasury Analyst
350 Madison Avenue, 4th floor | New York, NY 10017
Tel: 212.626.1199 | ariel.segal@leumiusa.com  

IMPORTANT DISCLOSURES

The opinions voiced in this material, including without limitation the statistic information herein, are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. The economic or market analyses or forecasts in this material reflect the views of the individuals who prepared them and do not necessarily represent the position of Bank Leumi USA, Leumi Investment Services Inc. or of other units of the worldwide Leumi Group. The analyses and forecasts should not be construed as a recommendation to buy or sell, or the solicitation of an offer to buy or sell any securities, currencies, or financial instruments.

Bank Leumi USA, other units of the Leumi Group, or the individuals that prepared the analyses or forecasts may have positions in securities, currencies, or financial instruments that may be affected by action that is consistent with the analyses or forecasts. Any economic forecasts set forth in the presentation may not develop as predicted. The material is based in part on information from third-party sources that we believe to be reliable but which have not been independently verified by us, and for this reason we do not represent that the information is accurate or complete, and no liability is assumed for any direct or consequential losses arising from their use. Except where otherwise indicated herein, the information in this material is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available.

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