The Public Securities Association said yesterday it has formed a committee to issue yearly forecasts on how economic events and fiscal policies will affect the nation's credit markets.
The committee - made up of economists from major Wall Street investment banks - will release its first report during a Dec. 1 news conference at PSA headquarters in New York City.
The report will include gross domestic product and consumer price projections and forecast interest rates and monetary policy for 1993.
The report also will assess how the policies of the administration of President-elect Bill Clinton will affect the municipal bond market, the government bond market, and the market for mortgage-backed securities, PSA president Heather Ruth said.
"We thought it appropriate to tap into the expertise of this impressive group of chief economists and issue a consensus report on what they see ahead for our markets in 1993," Ruth said in a statement.
The committee will be co-chaired by James Annable, chief economist of the First National Bank of Chicago, and Robert Giordano, director of economic research at Goldman, Sachs & Co.
Also serving on the committee are: Frederick Breimyer of State Street Bank and Trust Co., James Fralick of Morgan Stanley & Co., Alan Lerner of Bankers Trust Co., John Lipsky of Salomon Brothers Inc., Richard Rippe of Prudential Securities, John Silvia of Kemper Financial Services, Neal Soss of First Boston Corp., John Wilson of Bank of America, and Ray Worseck of A.G. Edwards & Sons Inc.
For some credit market players, the committee's report is welcomed.
All major investment firms maintain staffs of economists to analyze economic news and its effect on the credit markets. But the new PSA committee may provide some additional insight into the legislative agenda of the Clinton administration and how this agenda may affect the credit markets.
For example, Treasury and municipal market players are eagerly awaiting more definitive information on the size of the Clinton administration's proposed fiscal stimulus package, and what incentives the new White House team will provide for the issuance of municipal bonds.
William Sullivan, director of money market research at the investment banking firm of Dean Witter Reynolds Inc., said trepidation among government bond traders about the magnitude of the stimulus package has in recent months caused a spike in long-term interest rates.
Sullivan said the government bond market would fear an initial fiscal stimulus of more than $50 billion. He said interest rates may also rise if the package is not combined with a long-range plan to reduce the size of the federal government's budget deficit. The gas was about $290 billion for the last fiscal year, which ended Sept. 30.
Municipal market executives, who generally view the new Clinton administration as more friendly to the tax-exempt sector, are waiting for details about the new President's commitment to infrastructure spending that is likely to include the sale of municipal bonds.
Ruth said in a telephone interview that the forecast will include information that is publicly available to the committee. She added that the committee may issue a follow-up report after the Dec. 1 meeting if, for example, the markets are surprised by a fiscal-policy decision from the new President.
