ABN vurderer, at en tredjedel af den amerikanske økonomi bliver ramt af den tredje corona-bølge. Alligevel venter banken, at minusvæksten for 2020 bliver knap så slem som tidligere ventet, med minus 4,2 mod tidligere minus 4,8. Derimod venter banken en lavere vækst end forventet i 2021 – trods vacciner – nemlig på 3,2 mod tidligere 3,4. Væksten vil tage stærkt til efter andet kvartal. Banken tror, at centralbanken vil fastholde de lave renter i de kommnde år.
New US GDP and Rates forecasts
US Macro: Recovery delayed, but not diminished – The US is now experiencing its third wave in the pandemic so far, the second wave having occurred over the summer.
All told, we expect the economy to contract by -6.2% annualised in Q4 – significant, but a much smaller fall in output than the 33.2% drop seen in Q2.
Given the stronger pace of the recovery so far in the US, we are actually raising our 2020 forecast, to -4.2% from -4.8% previously. However, this is significantly weaker than the latest consensus forecast of -3.6%.
Source: ABN AMRO Group Economics
January runoff elections are key for the outlook – While Democrats have won the presidency (we do not expect president Trump’s legal challenges to change the election outcome), they have so far failed in their bid to take control of the Senate.
GDP forecast vs Trend (Q4 19 = 100)
Source: ABN AMRO Group Economics
US Rates: US yields to move lower and curves to flatten in the near term – Recently, the US yield curve has steepened on the back of the adoption of an average inflation target by the Fed and the possibility of a ‘Blue Wave’ (i.e. Democrats winning control of the Senate). We assume a split Congress in our base case.
Nevertheless, yields will be relatively high at the end of 2020 as the market is still pricing in some risk of Democrats winning the runoff elections on 5 January (see above).
The term premia is set to decrease again in the US
Short term average rate in (%), 10y Term premia in (%),
Source: ABN AMRO Group Economics, Bloomberg
From Q2 2021 onwards, we expect growth to pick up quickly, as the most vulnerable people will be inoculated against covid-19. We expect US yields to move slightly higher and the curve to steepen somewhat (as shown in the table below).
Meanwhile, we judge that it will be a while before the Fed’s target of average inflation of 2% will be reached. Indeed, we expect that it will be reached in 2024 or later in our base case.
As a result, we judge that the fed funds rate will be on hold for the coming years, which will anchor short term rates, but also restrain Treasury yields, as explained below. Finally, we judge that the Fed will continue to absorb new Treasury supply through large-scale purchases . This means that the rise in yields is likely to be very modest in the coming years.
US Treasury yield and short rate expectations
Source: Bloomberg, ABN AMRO Group Economics
