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Economic and Fixed Income Insights

Presented by Stifel, Nicolaus & Company, Incorporated

Initial jobless claims rose 3k from 241k to 244k in the week ending August 5. The four-week average, however, decreased from 242k to 241k, reinforcing a more positive assessment of US labor market conditions. The producer price index (PPI) fell 0.1% in July, the first month of decline since August 2016. Year-over-year, headline producer prices slowed from 2.0% to 1.9%, a six-month low. US Treasury (UST) yields trended lower over the past week amid increased geopolitical uncertainty and a lack of clarity in the momentum of the US economy. The market widely dismissed earlier tensions between the US and North Korea. More recently, however, safe haven assets are rising in demand. The 10-year UST finished 3 basis points lower at 2.22% while the 30-year UST finished 2 basis points lower at 2.81%. Municipal yields trended lower over the past week as a result of persistently low inflation, diminished policy expectations and positive seasonal trends. The 10-year MMD finished 5 basis points lower at 1.88% while the 30-year MMD finished unchanged at 2.74%.


Interest Rate Observations

Benchmark Current Previous
(+/-) Change Previous
(+/-) Change
10-Year UST 2.22% 2.25% (3) 1.56% 66
30-Year UST 2.81% 2.83% (2) 2.27% 54
10-Year MMD 1.88% 1.93% (5) 1.43% 45
30-Year MMD 2.73% 2.73% 0 2.16% 57
Federal Funds Rate 1.25% 1.25% 0 0.50% 75
1-month LIBOR 1.23% 1.23% 0 0.51% 72
SIFMA 0.78% 0.79% (1) 0.46% 32
10-year LIBOR Swap 2.17% 2.21% (4) 1.44% 73

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of August 14, 2017

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. @ 2017


Leaked FY-18 Budget Draft Proposes Deep Cuts To HUD

A copy of a recent internal-draft of President Trump’s FY-18 Budget was obtained by POLITICO and several advocacy organizations.  The document, dated May 4, proposes significant cuts to the HUD Budget.  The expanded document reflects many of the priorities outlined in the “Skinny Budget” released earlier this year by the Trump Administration, though readers should note that it may not reflect the final spending request which is expected May 23.   The documents, as presented, would fully zero out funding for key community development programs including CDBG, HOME, Choice Neighborhoods Initiative and make dramatic cuts to Project-Based and Tenant-Based Rental Assistance, Section 811, Homeless Assistance Grants as well Public Housing Capital and Operating Funds.  The budget document proposes a modest increase to the Section 202 program.

NH&RA Executive Director Thom Amdur notes, “It is hard to imagine a more austere HUD budget proposal.  These proposed cuts, if enacted would have a devastating impact on low-income families and communities around the country.  In particular, the public housing capital backlog would be exacerbate even further and innovative programs like the Rental Assistance Demonstration (RAD), which leverage private sector financing to recapitalize aging public housing would be crippled.  Multifamily owners of Project-Based section 8 properties will also experience substantial stress in the proposed budget.”  The National Low-Income Housing Coalition estimates that more than 250,000 families would lose their vouchers under the budget proposal.

HUD PROGRAMS ENACTED FUNDING FY 2017 (in Millions) Leaked Trump FY-18 Draft 5/4/17 (in Millions) Difference between FY-18 (Leaked) and Enacted FY-17 (in Millions)
Project-Based Rental Assistance  $10,816.00  $10,351.10  $(464.90)
Tenant-Based Rental Assistance  $20,292.00  $15,317.90  $(4,974.10)
Public Housing Capital Fund  $1,941.50  $628.00  $(1,313.50)
Homeless Assistance Grants  $2,383.00  $2,250.00  $(133.00)
Choice Neighborhoods Initiative  $137.00  $-    $(137.00)
Housing for the Elderly Program  $502.40  $510.00  $7.60
HOME Investment Partnerships  $950.00  $-    $(950.00)
Community Development Block Grants  $3,060.00  $-    $(3,060.00)
Public Housing Operating Fund  $4,400.00  $3,900.00  $(500.00)
Housing for Persons with Disabilities Program  $146.20  $121.30  $(24.90)