CAPITAL MARKETS WEEKLY UPDATE - Leumi USA

CAPITAL MARKETS WEEKLY UPDATE

Macro Commentary: 

Pending home sales posted a record gain Monday morning, coming in at 44.3%, exceeding all forecasts, giving U.S. stocks a boost to start the week.

The Business Roundtable’s survey shows confidence among U.S. CEOs are at their lowest levels since the financial crisis. 27% of the 136 CEOs surveyed said that they see a full recovery to be delayed until after 2021.

Confirmed cases of Covid-19 have exceeded 10 million with deaths surpassing 500,000 worldwide. WHO chief Tedros said that “the worst is yet to come” in briefing on Monday. Brazil, Russia, and the US are the countries with the three fastest rising case rates in the past week.

Fixed Income Market:

Following a week of spread tightening and high volumes that was fueled by the Fed’s announcement that they would be purchasing  

individual corporate bonds, spreads reversed and slipped back into “risk off mode”.   The week saw Investment Grade corporate spreads wider by 5-10 basis point while High Yield spreads gapped out 30-40 bps.  This morning we see continued weakness on light volumes.

Last week saw the pace of new issuance slow noticeably and the calendar is very light in front of the holiday shortened week.  However, despite the weaker tone to the market, Lipper data showed that IG bond funds continue to see strong demand with $7.98bn of inflows. 

June has seen a resurgence of retail interest in Structured Notes following a two-month lull.  LISI’s clients continue to favor our most traditional structures, those with performance linked to US Equity indexes. 

The municipal market was relatively stable on the week with little spread movement. New issuance remains steady with $7bn scheduled to price this week.  Muni funds also saw good inflows with $1.2bn – again according to Lipper. 

U.S. Equities:

A surge in coronavirus cases in southern states including Texas, Florida and Arizona sparked fear in the equity markets, with the S&P 500 closing 2.9% lower on the week.  Biotech and software continue to outperform with the NASDAQ down merely 1.9% on the week.  Two states decided to slow their reopening and place new restrictions on bars and restaurants, we haven’t seen a wholesale re-closure of these economies.

On Thursday, the Federal Reserve placed new caps on dividend payouts and limited stock buy-backs which negatively impacted several of the bank names.

Foreign Exchange:

The USD is trading firmer to begin an abbreviated trading week ahead of the 4th of July holiday weekend. Month-end re-balancing may bring some USD weakness versus the G-10 currencies during the first half of the week.  

The USD continues to remain weak against the ILS, as fears of a renewed surge of COVID-19 cases has weighed on the dollar. We are quickly approaching the next level of major support in USD/ILS at 3.4000. In the past, the Bank of Israel has entered the market to intervene in an attempt to weaken the ILS, as a result we will be very cautious at these levels.

The GBP has drifted lower over the past week and the UK has until Tuesday to ask for an extension on the transition period. The UK government has made it clear that it has all but ruled out asking for the extension and will continue to strive to get a deal done before the end of the transition period, which is year end.

Last Week's Economic Data June 29th

Last Week's Economic DataActualSurvey
New Home sales MoM16.6%2.7%
Wholesale Inventories MoM-1.2%0.4%
Durable Goods Orders15.8%11.4%
GDP Annualized QoQ-5.0%-5.0%
Personal Income-4.2%-6.0%
This Week's Economic DataRelease DateSurvey
Change in Nonfarm Payrolls07/02/203029k
Unemployment Rate07/02/2012.5%
Initial Jobless Claims07/02/201350k

This Week's Economic Data June 29th

Interest RatesCurrentWoWMoMYoY US Swap SpreadsCurrentWoWMoMYoY
1 Month Libor0.17%(1.4 bp)(1.2 bp)(222.7 bp)12-Month+12 bp(0.7 bp)(2.0 bp)(1.9 bp)
3 Month Libor0.30%(0.1 bp)(4.8 bp)(202.4 bp)2-Year+7 bp+0.7 bp(2.2 bp)(2.1 bp)
6 Month Libor0.37%(2.8 bp)(14.3 bp)(183.4 bp)3-Year+6 bp+1.7 bp(0.8 bp)(1.3 bp)
12 Month Libor0.56%(1.8 bp)(11.8 bp)(162.2 bp)5-Year+4 bp(0.0 bp)(1.9 bp)+1.3 bp
Fed Funds Effective0.08%(1.0 bp)+3.0 bp(230.0 bp)7-Year(2 bp)(0.4 bp)(1.6 bp)(1.4 bp)
SOFR0.08%(0.0 bp)+2.0 bp(235.0 bp)10-Year(2 bp)(4.0 bp)(2.8 bp)+23.1 bp
US Treasury YieldsCurrentWoWMoMYoY30-Year(50 bp)(4.9 bp)(3.8 bp)+25.8 bp
12-Month0.15%(1.5 bp)(0.5 bp)(177.3 bp)Equity MarketsCurrentWoWMoMYoY
2-Year0.16%(3.2 bp)(0.0 bp)(159.5 bp)Dow Jones 25,495 +1.9%+0.4%(4.2 %)
3-Year0.17%(4.8 bp)(2.1 bp)(153.3 bp)S&P 500 3,047 +1.3%+0.1%+3.6%
5-Year0.28%(5.5 bp)(1.9 bp)(148.2 bp)NASDAQ 9,846 +0.9%+3.8%+23.0%
7-Year0.48%(6.0 bp)(1.8 bp)(139.6 bp)CurrenciesCurrentWoWMoMYoY
10-Year0.64%(3.2 bp)(0.0 bp)(159.5 bp)Euro1.1233(0.2 %)+1.2%(0.5 %)
30-Year1.40%(3.2 bp)(0.0 bp)(159.5 bp)Japanese Yen107.7100(0.7 %)+0.1%+0.7%
US Swap Rates vs 3MLCurrentWoWMoMYoYBritish Pound1.2293(1.4 %)(0.4 %)(2.8 %)
12-Month0.27%(2.3 bp)(2.5 bp)(179.1 bp)Canadian Dollar1.3684(1.2 %)+0.7%(4.0 %)
2-Year0.23%(2.5 bp)(2.2 bp)(161.6 bp)Australian Dollar0.6859(0.7 %)+2.9%(1.5 %)
3-Year0.23%(3.1 bp)(2.9 bp)(154.6 bp)Swiss Franc0.9519(0.4 %)+1.0%+3.8%
5-Year0.32%(5.5 bp)(3.8 bp)(146.9 bp)Israeli Shekel3.4533(0.4 %)+1.7%+3.7%
7-Year0.46%(6.4 bp)(3.5 bp)(141.0 bp)Bitcoin 9,144 (5.2 %)(2.9 %)(12.8 %)
10-Year0.62%(7.1 bp)(2.8 bp)(136.4 bp)CommoditiesCurrentWoWMoMYoY
30-Year0.90%(8.1 bp)(3.8 bp)(133.6 bp)Gold 1,770 +0.9%+2.3%+25.6%
Silver18+0.4%(0.4 %)+16.2%
Copper268+1.1%+10.5%(0.9 %)
Crude Oil40(2.0 %)+11.7%(32.2 %)
Ariel Segal | Treasury Analyst
350 Madison Avenue, 4th floor | New York, NY 10017
Tel: 212.626.1199 | ariel.segal@leumiusa.com  

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