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Economic Update

March 9, 2015

Economic themes: Employment, ECB, Washington.

  • Employment: Good news was bad news, as nonfarm payrolls increased by 295k in February, well above forecasts of a 230k increase, and the unemployment rate ticked down to 5.5%. Equity and fixed income markets sold off on the anticipation that the Fed will be more likely to enact more restrictive monetary policy.  Federal Funds futures contracts imply a July 2015 rate hike.
  • ECB: The European Central Bank has officially kicked off their €1.1 trillion bond buying program, in hopes to stimulate the Eurozone’s stagnant economy. Last week, Germany was able to successfully sell €3.28 billion in 5-year government notes at -0.08%, marking the first time ever they’ve sold a 5-year note at a negative yield.  For longer term investors, the German 10-year bond is yielding an astounding 0.35%.  Such levels make the US 10-year treasury look remarkably attractive at 2.2%.  ECB President Mario Draghi added that securities will not be purchased if their yield is lower than the ECB deposit rate of -0.2%.  While some seem puzzled by negative yields, the combination of mandated purchases from banks, central banks, pension funds, and index funds, among others, has maintained the negative yields.  Meanwhile, Greek officials have been told to speed up negotiations in order to release more bailout funds after being awarded a four month extension, though risk running out of cash as soon as the end of the month.
  • Washington: Political risk is back, as Republicans are using the debt limit as leverage, again. The Federal government is scheduled to reach the debt limit on March 15th, though extraordinary measures could delay the ultimate deadline for 6-7 months.  Senate Majority Leader Mitch McConnell is working to quell such fears, ensuring his party will agree to raise the debt limit before it’s too late.
  • Economic highlights for the week ahead:
    • Thursday, 3/12/2015: Jobless Claims, Retail Sales.
    • Friday, 3/13/2015: PPI, Consumer Sentiment.


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.

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