Capital Markets Weekly Update - Leumi USA

Capital Markets Weekly Update

Macro Commentary: 

By: Ariel Segal

U.S. durable goods declined in the month of February by 1.1%, while surveyed estimates expected a 0.5% increase. The decrease was broad and not concentrated to a single industry. Supply chain issues are still limiting production, but the gradual increase in demand and stimulus is a boon to these manufacturers.

Ships have started moving again through the Suez Canal today as the giant container ship that was stranded, blocking the waterway for a week was freed. The canal’s closure will likely have a small long-term impact as the $10-billion-per-day cost to trade is inconsequential compared to total yearly global merchandise trade. 

Annualized GDP quarter-over-quarter was reported to be inline with estimates on Thursday.

The seven-day average of nationwide hospitalizations has increased for the first time since January 11th. 535 million vaccine doses have been given worldwide, with 143 million of them be given in the U.S.

Fixed Income Market:

By Joseph Colleran

The US Credit markets remained steady despite the volatility seen in UST’s and equities last week. Both IG and HY spreads remained mostly unchanged WoW. A noteworthy development took place in the HY New Issue market.  Through Friday, the total US HY New issuance for the year stands at $143 BLN – a new all-time record for total issuance in any Q1. This exemplifies the ongoing quest for yield and the willingness of investors to take on HY risk to find it. At the same time, with yields still near historical lows, corporate treasurers are very willing to issue debt at a relatively low cost. 

 As the quarter draws to a close, we continue to see strong client demand in the structured note sector as increased volatility in equities is helping to provide attractive coupon levels on the favored index-based S/N’s. 

Lipper Fund flow data for the week showed:    

      Domestic Equity Funds     down    $4.9 BLN

      IG Bond Funds                       up      $3.3 BLN

      HY Bond Funds                    down   $1.4 BLN 

      Municipal Bond Funds         up      $0.4 BLN

Prior Week:

     Domestic Equity Funds      down    $0.6 BLN

     IG Bond Funds                      up       $5.4 BLN

      HY Bond Funds                     up       $0.4 BLN 

      Municipal Bond Funds        up       $1.05 BLN

U.S Equities:

By: James Zurovchak

US Treasury rates gave equity markets a reprieve last week as the yield on the 10yr eased back to trade between 1.60-1.65% most of the week.  S&P 500 and DJI responded in kind posting gains of 1.6% and 1.4%, respectively and each setting new all-time closing highs on Friday.  Despite finishing the week strong on Friday, NASDAQ was down 0.6% on the week. The move higher in equities was fairly broad based as 9 of 11 GICS sectors were up on the week, led by Consumer Staples (+3.9%), Real Estate (+3.5%), Energy (+2.9%). Communication Services (-1.1%) and Consumer Staples (-0.1%) were the only losers on the week.  Value and Growth finished the week +1.4% and +1.2% respectively. Despite a strong close to the week on Friday, Small Caps underperformed on the week posting a 2.9% decline. Focus this week will be on Friday’s jobs report, the unveiling of Biden’s infrastructure spending plan and the continued push and pull between cyclical and growth stocks. Expect some volatility as this week marks quarter end as well as Passover and a long Easter weekend with markets closed on Good Friday.  

Foreign Exchange:

By Anthony Minardo

The US Dollar finished the week at/or near four-month highs vs. most G10 currencies. The move higher in the U.S. bond market yields continues to be the catalyst for the recent strength of the U.S. dollar. Economic numbers for the week of March 22-26 were mixed as we saw weaker home and existing sales, but stronger than expected GDP printed at 4.3% (forecast was 4.1%). This week we will watch the always important ADP employment numbers out on Wednesday and U.S. employment numbers for March are reported on Friday. The economic forecast for both numbers is quite strong, the ADP forecast is +550,000 and the change in Non-Farm Payrolls forecast is +643,000. The markets are also predicting a drop in the Unemployment rate from 6.2% to 6.0%.

Financial Planning:

By Brian Stigliano 

The Power of Rebalancing


Buy low and sell high. It’s easier said than done. However, it can be made easier with a diversified portfolio through the power of rebalancing. Rebalancing is a mechanism for maintaining the asset allocation of a portfolio by selling an asset that has grown too large and using the proceeds to buy an asset that has become too small.  

For example, consider a two-asset portfolio made up of 50% of an S&P 500 mutual fund (stocks) and 50% of an aggregate bond mutual fund (fixed income). In 2020, the stock portion would have grown much more than the fixed income portion. Therefore, rebalancing at the end of 2020 would have consisted of selling a portion of the S&P 500 mutual fund and buying more of the bond mutual fund. This would have forced you to sell high on the stock allocation and buy (relatively) low on the fixed income allocation.  

Rebalancing does not have to be limited to the relationship between stocks and fixed income. You can rebalance your stock portfolio by selling and buying growth/value styles as one typically performs better than the other. In general, the more diversified the portfolio, the more opportunities there are to rebalance.

This Week's Economic Data 3/30

This Week's Economic DataRelease DateSurvey
ADP Emplyment Change3/31/21550k
Initial Jobless Claims4/1/21680k
Change in Nonfarm Payrolls4/2/21730k
Unemployment Rate4/2/216.0%
Factory Orders4/5/21-0.8%
Source: Bloomberg L.P.

Last Week's Economic Data 3/30

Last Week's Economic DataActualSurvey
New Home Sales775k870k
Durable Goods Orders-1.1%0.6%
Initial Jobless Claims684k730k
GDP Annualized QoQ4.3%4.1%
Wholesale Inventories MoM0.5%0.8%
Personal Income-7.1%-7.2%

Market Data Values 3/30

Interest RatesCurrentWoWMoMYoY US Swap SpreadsCurrentWoWMoMYoY
1 Month Libor0.11%+0.1 bp(1.0 bp)(88.1 bp)12-Month+16 bp+1.2 bp+4.0 bp(43.0 bp)
3 Month Libor0.20%+1.2 bp+1.4 bp(124.8 bp)2-Year+13 bp+1.9 bp+3.6 bp(13.0 bp)
6 Month Libor0.20%(0.1 bp)(0.0 bp)(86.9 bp)3-Year+16 bp+4.0 bp+5.0 bp(3.6 bp)
12 Month Libor0.28%+0.5 bp(0.2 bp)(68.7 bp)5-Year+10 bp+4.7 bp+2.5 bp(4.6 bp)
Fed Funds Effective0.07%(3.0 bp)7-Year+2 bp+6.6 bp(1.9 bp)(4.2 bp)
SOFR0.01%10-Year+3 bp+10.8 bp+22.8 bp+111.1 bp
US Treasury YieldsCurrentWoWMoMYoY30-Year(23 bp)+10.9 bp+21.3 bp+140.8 bp
12-Month0.06%(0.3 bp)(1.0 bp)(3.6 bp)Equity MarketsCurrentWoWMoMYoY
2-Year0.14%(0.7 bp)+1.4 bp(10.1 bp)Dow Jones 33,171 +0.0%+0.1%+0.5%
3-Year0.31%(0.5 bp)+3.8 bp+2.3 bpS&P 500 3,971 (0.0 %)+0.0%+0.6%
5-Year0.89%+2.5 bp+15.6 bp+49.4 bpNASDAQ 13,060 (0.0 %)(0.0 %)+0.7%
7-Year1.36%+2.2 bp+24.5 bp+80.2 bpCurrenciesCurrentWoWMoMYoY
10-Year1.71%(0.7 bp)+1.4 bp(10.1 bp)Euro1.1769(0.0 %)(0.0 %)+0.1%
30-Year2.41%(0.7 bp)+1.4 bp(10.1 bp)Japanese Yen109.7700(0.0 %)(0.0 %)(0.0 %)
US Swap Rates vs 3MLCurrentWoWMoMYoYBritish Pound1.3765+0.0%(0.0 %)+0.1%
12-Month0.21%+0.9 bp+3.0 bp(46.6 bp)Canadian Dollar1.2585-+0.0%+0.1%
2-Year0.27%+1.3 bp+4.9 bp(23.1 bp)Australian Dollar0.7636+0.0%(0.0 %)+0.2%
3-Year0.47%+3.5 bp+8.8 bp(1.3 bp)Swiss Franc0.9389(0.0 %)(0.0 %)+0.0%
5-Year0.99%+7.2 bp+18.1 bp+44.8 bpIsraeli Shekel3.3320(0.0 %)(0.0 %)+0.1%
7-Year1.39%+8.8 bp+22.6 bp+75.9 bpBitcoin 57,777 +0.1%+0.2%+7.9%
10-Year1.74%+10.2 bp+24.2 bp+101.0 bpCommoditiesCurrentWoWMoMYoY
30-Year2.17%+10.3 bp+22.7 bp+130.7 bpGold 1,713 (0.0 %)(0.0 %)+0.1%
Silver25(0.0 %)(0.1 %)+0.8%
Copper405(0.0 %)(0.0 %)+0.9%
Source: Bloomberg L.P.Crude Oil62+0.1%+0.0%+2.1%

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.

Investing involves risk. Past performance is not a guarantee or a reliable indicator of future results. You should obtain relevant and specific professional advice before making any investment decision. All investors must carefully consider the risks, charges, fees, and expenses, review the prospectus or other offering information if applicable, and consider their personal financial situation and tolerance for risk before making any investment.

Bank Leumi USA is an FDIC Insured, New York State chartered bank. In the U.S., banking products and services are provided through Bank Leumi USA and brokerage products and services are provided by Leumi Investment Services Inc. Leumi Investment Services Inc. is a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and is a wholly-owned subsidiary of Bank Leumi USA.  Certain products and services are not available to U.S. residents and/or are offered through third party providers.

Non-deposit investment products offered through Bank Leumi USA and Leumi Investment Services Inc. are:

•             Not insured by the FDIC or any other federal or government entity

•             Not guaranteed by Bank Leumi USA, Bank Leumi le-Israel, B.M., or any other bank

•             Subject to investment risks, including possible loss of the principal amount invested

© 2021 Bank Leumi USA. Leumi, Leumi Investment Services Inc., and Bank Leumi USA are registered trademarks of Bank Leumi USA. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities.

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.

Investing involves risk. Past performance is not a guarantee or a reliable indicator of future results. You should obtain relevant and specific professional advice before making any investment decision. All investors must carefully consider the risks, charges, fees, and expenses, review the prospectus or other offering information if applicable, and consider their personal financial situation and tolerance for risk before making any investment.

Bank Leumi USA is an FDIC Insured, New York State chartered bank. In the U.S., banking products and services are provided through Bank Leumi USA and brokerage products and services are provided by Leumi Investment Services Inc. Leumi Investment Services Inc. is a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and is a wholly-owned subsidiary of Bank Leumi USA. Certain products and services are not available to U.S. residents and/or are offered through third party providers.

Non-deposit investment products offered through Bank Leumi USA and Leumi Investment Services Inc. are:

• Not insured by the FDIC or any other federal or government entity

• Not guaranteed by Bank Leumi USA, Bank Leumi le-Israel, B.M., or any other bank

• Subject to investment risks, including possible loss of the principal amount invested

© 2019 Bank Leumi USA. Leumi, Leumi Investment Services Inc., and Bank Leumi USA are registered trademarks of Bank Leumi USA. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities.

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