Monthly Market Monitor

June 2024

Macro

The second estimate of first quarter 2024 real GDP growth was revised lower to an annualized rate of 1.3%. While this marks the slowest growth rate in almost two years, excluding the impacts of trade, inventory and government spending, underlying domestic demand appears strong and remains consistent with recent quarters.

Minutes from the May 1 Federal Open Market Committee meeting acknowledged the lack of progress on inflation during the first quarter. Additionally, the minutes indicated that while current monetary policy is restrictive, members were uncertain regarding the degree of restrictiveness. Their uncertainty was reflected in discussions about whether the economy is less sensitive to interest rates than in prior business cycles; the neutral, long-run fed funds rate is higher than previously believed; and/or potential economic output could be lower than previously thought.

Credit

May new issuance exceeded expectations, closing the month with slightly more than $130 billion in new supply. Forecasted issuance for June approximates $90 billion, which, if accurate, would represent the slowest monthly pace of the year.

Primary market issuance was dominated by smaller deals, unlike earlier in 2024, when there were several large, acquisition-related financings.

Credit spreads compressed an additional 2 basis points during May; valuations remain quite expensive on a historical basis.

Structured

The asset-backed securities sector continued its year-to-date streak of positive excess returns. Despite further spread compression, valuations remain favorable.

Mortgage-backed securities performed well during May, outpacing other investment-grade sectors, after underperforming for much of the year.

Chart of the Month: ICI Taxable Bond Long-Term Mutual Fund and ETF Weekly Flows, ($ millions)

ICI Taxable Bond Long-Term Mutual
Fund and ETF Weekly Flows, ($ millions)

Year to date, taxable fixed income products have experienced persistent inflows.
Robust investor demand for the fixed income sector has manifested a strong technical tailwind and contributed to tightening risk premiums.

As of 5/22/2024. Source: Bloomberg L.P., ICI (used with permission).

Market Data

As of 5/31/2024. Source: Bloomberg L.P.

Bloomberg Sector/Index Performance (USD)

As of 5/31/2024. Source: Bloomberg L.P.

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