Financial Highlights

Transcription

1 November 17, 2010 Financial Highlights Federal Reserve Balance Sheet 1 Consumer Credit Consumer Credit: Revolving and Nonrevolving 2 ABS Yields and Issuance 3 Corporate Bonds Yield Spreads and Bond Issuance 4 Broad Financial Market Indicators Treasury Yields 5 LIBOR to OIS Spread 5 Fed Funds Futures 6 TIPS Breakeven Inflation Rates 6

2 Federal Reserve 2,500 Agency Debt & MBS Federal Reserve Assets (Uses of Funds) $ billions The balance sheet increased $12.7 billion for the week ended November 10. At the latest FOMC meeting on November 2-3, the Federal Reserve announced its plans to continue its existing policy of reinvesting principal payments from agency debt and mortgage backed securities. Further, the committee intends to purchase $600 billion in longer-term Treasuries by the end of the second quarter of The New York Fed will be conducting operations and posting them here. 2,000 1,500 1, Lending to Nonbank Credit Markets Short-Term lending to Financials Other Treasuries Dec-2007 Apr-2008 Aug-2008 Dec-2008 Apr-2009 Aug-2009 Dec-2009 Apr-2010 Aug-2010 Source: Federal Reserve Board Through Nov 10, 2010 Treasuries accounted for the majority of the growth in the balance sheet, increasing $11 billion. Agency Debt & MBS was unchanged. On the liabilities side of the balance sheet, bank reserve balances increased $24 billion while the Treasury s general account with the Fed fell $28 billion. AIG-related assets and currency in circulation also grew by about $8 billion and $6 billion, respectively. 2,500 2,000 1,500 1,000 Treasury SFA Other Banks Reserve Balances Currency in Circulation Federal Reserve Liabilities (Sources of Funds) $ billions Dec-2007 Apr-2008 Aug-2008 Dec-2008 Apr-2009 Aug-2009 Dec-2009 Apr-2010 Aug-2010 SFA = Supplementary Financing Account Through Nov 10, 2010 Source: Federal Reserve Board Assets: Lending to nonbanks TALF, CPFF, AMLF, and MMIFF; Short-term lending to financials discount window, TAF, currency swaps, PDCF, and repos; Misc. Maiden Lanes I, II, and III, credit to AIG, and other Fed assets. Liabilities: Other Reverse repos, Treasury cash holdings, and deposits with Federal Reserve Banks other than reserve balances and excluding the Supplementary Financing Program. Financial Highlights November 17,

3 Consumer Credit SA Consumer Credit - Monthly Change and Total Outstanding Billions $ Consumer credit outstanding increased in September, reflecting a $10.4 billion increase in nonrevolving credit and a $8.3 billion decrease in revolving credit. Monthly Changes $25 $15 Nonrevolving Revolving Consumer Credit Outstanding $2,500 $1,500 Revolving credit outstanding has now fallen for 25 consecutive months as consumers continue to reduce credit card debt. $5 -$5 $500 -$500 -$15 -$1,500 -$25 -$2,500 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Through September Source: Federal Reserve Board Credit card delinquency rates have been steadily declining since spring of 2009 for most major card issuers. 9% United States 30+ Day Credit Card Delinquency Rates Amex (31+ Day) BOA Capital One Chase Citibank (35+ Day) Discover US 30 Day 8% 7% 6% 5% 4% 4.3% 3% 2% 1% Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Source: Bloomberg though Oct Bloomberg s U.S. 30 day credit card delinquency index was 4.3% as of October 31, down from a high of 5.9% in March Assets: Lending to nonbanks TALF, CPFF, AMLF, and MMIFF; Short-term lending to financials discount window, TAF, currency swaps, PDCF, and repos; Misc. Maiden Lanes I, II, and III, credit to AIG, and other Fed assets. Liabilities: Other Reverse repos, Treasury cash holdings, and deposits with Federal Reserve Banks other than reserve balances and excluding the Supplementary Financing Program. Financial Highlights November 17,

4 Consumer Credit Issuance of consumer-related asset backed securities came in slightly below second-quarter levels. Yield spreads on security issuance related to consumer debt remain stable. basis points 900 AAA-rated Consumer ABS Yield Spreads over 2-year Treasury Auto Credit Card 100 TALF Creation Announced 0 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Source: Bloomberg and Merrill Lynch Through Nov 16 Assets: Lending to nonbanks TALF, CPFF, AMLF, and MMIFF; Short-term lending to financials discount window, TAF, currency swaps, PDCF, and repos; Misc. Maiden Lanes I, II, and III, credit to AIG, and other Fed assets. Liabilities: Other Reverse repos, Treasury cash holdings, and deposits with Federal Reserve Banks other than reserve balances and excluding the Supplementary Financing Program. Financial Highlights November 17,

5 Corporate Bonds Corporate yield spreads have declined for riskier securities, while rising for Aaa and Baarated ones. Source: Merrill Lynch, Moody s, Federal Reserve Board Since the September FOMC meeting, corporate yield spreads have narrowed by 55 basis points (bps) for the Merrill Lynch High Yield Index but have risen 15 bps for Moody s Baa-rated bonds. The Aaa-rated bonds were also up, by 19 bps. U.S. corporations accessed the bond market for $93 billion in financing during October Source: SIFMA According to SIFMA, U.S. corporate bond issuance hit $93 billion in October 2010, and highyield debt issuance was $30.1 billion of that amount. Financial Highlights November 17,

6 Broad Financial Market Indicators Longer-dated Treasury yields have risen sharply in the past week. Thirty-year Treasury bonds have risen 29 bps to 4.38% since November 3, the 10-year notes have risen 25 bps to 2.92%, and the two-year notes by 19 bps to 0.53%. LIBOR to OIS spreads, after a period of normalization this summer, are relatively unchanged. Financial Highlights November 17,

7 Broad Financial Market Indicators Since the November FOMC meeting, the curve of expected rates beginning in June 2011 has moved higher, according to the fed funds futures market. Source: Bloomberg As of November 17, the futures market for fed funds indicates an implied rate of about 29 bps for the October 2011 contract, nearly 10 bps higher than what followed the November FOMC meeting. Breakeven inflation rates rose strongly between the September and November FOMC meetings but since then have declined around 20 basis points. Source: Bloomberg/Barclays Breakeven inflation rates have risen strongly between the September and November FOMC meetings but have since drifted lower by nearly 20 bps. Looking at one measure calculated by Barclays suggests investors see CPI inflation five to 10 years out as averaging about 2.63%, which is up 15 bps from the September FOMC meeting but is down from about 2.75% in the spring. Financial Highlights November 17,