September 9, 2013
Economic themes: Employment, Syria, International Trade, Japan.
- Employment: Payroll jobs increased by 169k in August, below estimates of 175k, led by retail, health care, business services, and food services. The unemployment rate fell to 7.3%, from 7.4%, due to the labor force declining by 312k, bringing the labor participation rate to 63.2%, the lowest since August 1978. With modest employment growth and weak inflation, the Fed does not have much room to commence tapering their quantitative easing program, unless they agree to taper based on additional variables. A Bloomberg survey of economists indicate the Fed will decide to taper quantitative easing by $10 billion to $75 billion per month at its 9/17-18 meeting.
- Syria: President Obama continues to beat his war drum, though a lack of intervention has brought some stability to markets, as last week’s G20 summit failed to gain broad international support. The senate and house are expected to vote on resolutions this week and next week respectively.
- International Trade: The trade gap increased to $39.1 billion in July, from $34.4 billion in June, due to an increase in nonpetroleum goods. Our largest deficits include China, the European Union and OPEC, with surpluses with Hong Kong, Brazil, and Australia.
- Japan: Q2 GDP growth for the island nation was revised upward to 3.8%, from 2.6%, fueled by capital expenditures. Meanwhile, Japan was awarded the 2020 Olympics, which could provide a $30 billion boost to GDP over seven years, and create as many as 150k jobs.
- Economic highlights for the week ahead:
- Thursday, 9/12/2013: Jobless Claims.
- Friday, 9/13/2013: PPI, Retail Sales, Consumer Sentiment.
Municipal market themes: New issuance, Stockton Water, Cal CABS
- New issuance: Volume is scheduled to pick up this week with $5.86 billion on the new issue calendar, up from last week’s $1.43 billion. Treasuries on stronger for a second consecutive day amid speculation that tapering could be smaller than previously forecasted.
- Stockton Water: Fitch upgraded bonds for the Stockton Delta Water Supply project to ‘BBB’ from ‘BB+,’ citing the general protection of water utility revenues from bankruptcy discussions.
- Cal CABS: A bill has been approved by the legislature and has been sent to Jerry Brown for final approval, is scheduled to limit the ratio of total debt service to principal for each series of school district capital appreciation bonds to not exceed 4:1. The bill was in response to media scrutiny of bonds issued with ratio’s as high as 20:1.
This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service. Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital. Past performance does not guarantee future results. Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.