The Macro Outlook for w/c 8 February 2021
A much quieter week on the data front.
The main US data releases this week will be the University of Michigan consumer sentiment data for early Feb and CPI for Jan. We continue to follow the initial jobless claims as one of the higher frequency indicators of employment improvement. Last week, initial claims for State and Federal programs were again somewhat lower at +1.16m claims by people (the prior week was 1.24m new claims). Total ongoing claims have also started to trend lower. Ongoing claims totaled 17.8m people (wk ending 16 Jan).
US Fed Chair Powell will give a speech this Wed on the “State of the US Labor Market” at the Economic Club of NY.
Germany industrial production for Dec will be released this week and will be an important barometer, as Germany has been the key market lifting broader Eurozone manufacturing activity. Rising infections and tightening restrictions have been impacting the German economy. Last week, German retail sales and new factory orders disappointed in Dec.
In Australia, business and consumer sentiment surveys will be released this week for Jan and early Feb. These are the high-frequency indicators of activity and sentiment. While the pandemic remains under control and activity continues to rebound, pockets of weakness remain. It will be important to see how sentiment is trending among states and key industries.
The calendar of US Fed purchases of Treasuries and MBS is incomplete for this week, and the new schedule will be released on 11 Feb. For the week up to, and including the 11 Feb, the Fed plans to purchase $16.63bn in US Treasury securities (last week $23.6bn). The Fed will continue to purchase MBS at an elevated pace, this week buying $27.2bn in MBS ($32.4bn last week). The target for the monthly increase in Fed holdings of MBS is at least $40bn/mth.
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $285bn in ST Bills this week, with no change in new money.
This week, approx. $18bn in Bills will mature on the Fed balance sheet and will be rolled over.
This week, the US Treasury will also auction $126bn in Notes and Bonds – which will settle next week.
The US Treasury released the Q1 refunding documents last week. The estimated net cash to be raised this quarter was revised to $274bn (down from the original $1.127tr estimate). The US Treasury cash balance is expected to be $800bn at the end of Q1 (currently approx. $1.6tr). Changes to the issuance of CMB’s will commence after next week.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net.
