11 September 2009
US Economics/Strategy Weekly
Housing Recovery Has Begun
Deutsche Bank Securities Inc.
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APPENDIX 1. MICA(P) 106/05/2009
Economics
Table of Contents
Overview ............................................................ Page 2
Bill to coupon switch.......................................... Page 6
Calendar.............................................................. Page 8
Contacts ............................................................. Page 9
Research Team
Joseph LaVorgna
Economist
(+1) 212 250-7329
joseph.lavorgna@db.com
Carl Riccadonna
Economist
(+1) 212 250-0186
carl.riccadonna@db.com
Mustafa Chowdhury
Research Analyst
(+1) 212 250-7540
mustafa.chowdhury@db.com
Marcus Huie
Research Analyst
(+1) 212 250-8356
marcus.huie@db.com
Forecasts
2009 2010
Q1 Q2 Q3F Q4F Q1F Q2F
Real GDP (% q/ q AR)
-6.4 -1.0 3.0 2.5 2.6 3.1
Core PCE (%y/ y)
1.7 1.6 1.3 1.3 1.1 0.8
Unemployment rate
8.1 9.3 9.6 10.0 10.2 10.0
Fed funds
0.0 0.0 0.0 0.0 0.0 0.0
2-yr Treasury Yield
0.80 1.50 0.80 1.00 1.25 1.50
10-yr Treasury Yield
2.67 4.00 3.25 3.50 3.75 4.00
Economics Global Markets Research Macro
􀂄 Overview: Next week we get data on August housing starts and permits,
and we expect both series to move higher, albeit from substantially
depressed levels. Alongside improving builder sentiment, stabilizing
home prices, strengthening home sales and less severe tightening in
lending standards, it is increasingly clear to us that the housing sector has
bottomed and that it will begin to modestly add to real GDP going
forward.
􀂄 Bill to coupon switch: A switch by central banks from bills to coupons,
owing to reduced liquidity risks, should be supportive for the Treasury
market in the near term. Over the longer term, however, rising longduration
issuance and the end of Fed buying should result in pressures for
rising yields, with the caveat that if the securitization market doesn’t
recover, there could be a secular shift into Treasuries.