FHLBNY

FHLBNY

© 2020 FEDERAL HOME LOAN BANK OF NEW YORK • 101 PARK AVENUE • NEW YORK, NY 10178 • WWW.FHLBNY.COM

Brian Jones, Financial Economist

August 13, 2020

How Strong a Rebound?

FHLBNY

FHLBNY

Early Projections Call for a Fairly Sharp Snapback in Q3 Real GDP Growth

18.0%

17.0%

20.5%

16.9%

15.6%

17.8%

10%

12%

14%

16%

18%

20%

22%

Bloomberg Consensus Congressional Budget Office Atlanta Fed NY Fed GDP Nowcast NY Fed WEI Hours Worked

Average17.6%

2

FHLBNY

FHLBNY

Rebound in Real Consumer Spending Expected to Fuel Rise in Q3 GDP Growth

Source: Bureau of Economic Analysis

-1.1

5.5 5.02.3 3.8 2.7

1.5 0.62.3 1.3 2.2 2.5 2.3 1.7

2.93.9

3.8 2.72.1

1.32.9

1.52.6 2.4

-5.0

-32.9

17.6

6.5

-40

-30

-20

-10

0

10

20

2014 2015 2016 2017 2018 2019 2020

Net Contributions to Real GDP Growth(quarterly percentage change at seasonally adjusted annual rate)

Consumer Spending Business Fixed Investment Residential Investment Inventories Net Exports Government Outlays Real GDP

3

FHLBNY

FHLBNY

Recovery of Jobs Lost Amid COVID-19 Crisis Will Be Crucial to Magnitude of Bounceback

Note: Shaded areas denote recessions. Source: U.S. Department of Labor

4

0

5,000

10,000

15,000

20,000

25,000

Still a Considerable Way to Go to Recover COVID-19 Job Losses(thousands, seasonally adjusted)

Jobs Lost Jobs Recovered

1,000,000

4,000,000

7,000,000

10,000,000

13,000,000

16,000,000

19,000,000

22,000,000

25,000,000

28,000,000

100,000

1,100,000

2,100,000

3,100,000

4,100,000

5,100,000

6,100,000

7,100,000

2007 2009 2011 2013 2015 2017 2019

Initial Claims (scale left) Continuing Claims (scale right)

Jobless Claims Remain on Downtrends, But Further Progress Necessary to Ensure Recovery

FHLBNY

FHLBNY

NBER May Ultimately Determine That the Economy Bottomed in April

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2010 2015 2020

St. Louis Fed Smoothed Recession Probabilities Model NY Fed Yield Curve Model

June 2020: 39.0%July 2021: 20.0%

Note: Shaded areas denote recessions. Sources: Federal Reserve Banks of New York and St. Louis

5

FHLBNY

FHLBNY

Recent Economic Soundings Have Beat Consensus Expectations By a Wide Margin

-150

-100

-50

0

50

100

150

200

250

300

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Citi U.S. Economic Surprise Index(end of month observations)

Note: Shaded areas denote recessions. Source: Citi Investment Research, Bloomberg

6

FHLBNY

FHLBNY

Key Economic Indicators Have All Moved off Coronavirus-Induced Lows

7

Note: Shaded area denotes recession. Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, Federal Reserve System, Institute for Supply Management

91.6

91.3

91.8

105.9

96.986.6

108.2

101.4

50

60

70

80

90

100

110

80

85

90

95

100

105

110

Jan Feb Mar Apr May Jun Jul

Recent Performances of Key Economic Variables(Index February Cycle Peak = 100)

Nonfarm Payrolls (left) Total Hours Worked (left) Industrial Production (left)Control Retail Sales (left) Nondefense Capital Goods Shipments Ex Aircraft (left) Motor Vehicle Sales (right)ISM Manufacturing (right) ISM Non-Manufacturing

FHLBNY

FHLBNY

U.S. Railroad Traffic Now Well Off Pandemic Bottoms

8

FHLBNY

FHLBNY

Activity Improving in Service-Producing Industries, Even in Areas That May Have Reopened Prematurely

Source: Calculated Risk

9

FHLBNY

FHLBNY

Consumers Returning to the Road; Public Transit Usage Will Climb as Social-Contact Restrictions Are Relaxed

Source: Calculated Risk

10

FHLBNY

FHLBNY

Other Areas of the Economy Will Take Significantly Longer Time to Recover

11

Source: Calculated Risk

FHLBNY

FHLBNY

Core Consumer Inflation Gauges Will Remain Well Below Fed Target Until Spring 2021

Notes: Light blue shaded areas denote recessions. Pink shaded area denotes projections. Sources: Bureau of Labor Statistics and FHLBNY estimates

0.5

1.0

1.5

2.0

2.5

3.0

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Core Consumer Price Index Core PCE Chain Price Index Federal Reserve Target

%

Core Consumer Inflations Measures

12

FHLBNY

FHLBNY

Financial Conditions Have Moved Into Accommodative Territory

Note: Shaded areas denote recessions. Source: Bloomberg

-10

-8

-6

-4

-2

0

2

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Bloomberg United States Financial Conditions Index

Std Dev

22-Jul-20 13-Aug-20 Change

US Financial Conditions 0.02 0.28 0.26

Money Market Spreads:

TED Spread 14.90 17.24 2.34

Libor/OIS Spread 18.05 18.79 0.74

Com Paper/T-Bill Spread 9.59 10.00 0.41

Bond Market Spreads:

Baa/10-Yr Treasury Spread 174.28 161.78 -12.50

High-Yield/10-Yr Treas Spread 5.06 4.80 -0.26

Muni/10-Yr Spread 26.94 5.83 -21.11

Swaption Volatility Index 58.79 62.24 3.45

Equity Market:

S&P 500 3265.84 3380.35 114.51

VIX S&P Volatility Index 24.73 22.31 -2.42

13

FHLBNY

FHLBNY

Fed Officials Anticipate No Change in Administered Rates Through 2022

Percent Percent

3.375 3.375

3.25 ll l l 3.25

3.125 l l 3.125

3 ll l l ll 3

2.875 l ll ll 2.875

2.75 lll lll ll l 2.75

2.625 ll lll l ll ll 2.625

2.5 llllllll llllllll llllllll llllllll 2.5

2.375 lllll l lllll lllll lll lllll llll l l l l 2.375

2.25 l ll lll 2.25

2.125 ll llllll ll llll lllll llll lll 2.125

2 l l l 2

1.875 lllllll ll llll lllll lll llll lll lllll 1.875

1.75 1.75

1.625 llllllll lllllllllllll llll llll l l 1.625

1.5 1.5

1.375 1.375

1.25 1.25

1.125 l 1.125

1 1

0.875 0.875

0.75 0.75

0.625 0.625

0.5 0.5

0.375 l 0.375

0.25 0.25

0.125 lllllllllllllllll lllllllllllllllll lllllllllllllll 0.125

Jun '19 Sep '19 Dec '19 Jun '20 Jun '19 Sep '19 Dec '19 Jun '20 Sep '19 Dec '19 Jun '20 Jun '19 Sep '19 Dec ' 19 Jun '20

Longer Run2020 2021 2022

Source: Federal Reserve Board

14

FHLBNY

FHLBNY

Fed Securities Holdings Stand $2.3 Trillion Above Their Pre-COVID-19 Level

Source: Federal Reserve Board

15

$0

$1

$2

$3

$4

$5

$6

$7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Securities Held Outright by the Federal Reserve(trillions of dollars)

Treasuries Federal Agency Debt Mortgage-Backed Securities CMBS Securities Held Outright

FHLBNY

FHLBNY

Consensus Projections Call for Steady Rise in Treasury Rates Through Summer 2021

Sources: Bloomberg, Blue Chip Consensus

0.130.10 0.11 0.14 0.16

0.30

0.68

1.37

0.10.2

0.30.4

0.5

0.8

1.2

1.9

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

Fed Funds 3-Month 6-Month 1-Year 2-Year 5-Year 10-Year 30-Year

8/13/2020 4Q20 1Q21 2Q21 3Q21 4Q21

16

FHLBNY

FHLBNY

NY Factory Activity Expanded in July, Firms More Hopeful About the Future

Note: Shaded areas denote recessions. Sources: Federal Reserve Bank of New York, FHLBNY estimates

10

20

30

40

50

60

70

80

Empire State Manufacturing Survey(diffusion indexes, 50 = no change from prior month)

Composite New Orders Employment

25

30

35

40

45

50

55

60

65

70

Empire State Manufacturing Composite Indexes

Present Future

17

FHLBNY

FHLBNY

Local Service-Producing Activity Stabilized, But Firms Remain Concerned About Business Climate

Note: Shaded areas denote recession. Sources: Federal Reserve Bank of New York, FHLBNY estimates

0

10

20

30

40

50

60

70

80

90

New York Fed Business Leaders Survey(diffusion indexes, 50 = no change from prior month)

Business Activity Business Climate Employment Wages

10

20

30

40

50

60

70

80

New York Fed Business Leaders Survey(diffusion indexes, 50 = no change from prior month)

Future Business Activity Future Business Climate

18

FHLBNY

FHLBNY

Labor Market Conditions in FHLBNY Coverage Area Improving

Note: Shaded areas denote recession. Source: U.S. Department of Labor

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2016 2017 2018 2019 2020

Initial Claims (scale left) Continuing Claims (scale right)

Unemployment Insurance Claims in the FHLBNY District

0

2

4

6

8

10

12

14

16

18

20

2016 2017 2018 2019 2020

FHLBNY Insured Unemployment Rate

19

FHLBNY

FHLBNY

Low Rates Are Supporting a Sharp Rebound in Home-Purchase Mortgage Applications

Note: Shaded areas denote recessions. Sources: Mortgage Bankers Association

2.50

3.00

3.50

4.00

4.50

5.00

5.50

2014 2015 2016 2017 2018 2019 2020

Mortgage Interest Rates

5-Yr ARM 15-Yr Fixed 30-Yr Fixed

100

150

200

250

300

350

400

450

500

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Home-Purchase Mortgage Applications

20

FHLBNY

FHLBNY

Leap in Contract Signings Point to Coming Surge in Existing Home Sales

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

60

70

80

90

100

110

120

130

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

U.S. Pending and Existing Home Sales

Pending Home Sales (index 2001 = 100, left) Existing Home Sales (millions saar, right)Annual Averages

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Pending and Closed Home Sales in New York & New Jersey(seasonally adjusted)

Pending Sales Closed Sales Annual Average Sales

Note: Shaded areas denote recessions. Sources: National Association of Realtors, NJ Realtors, NYSAR

21

FHLBNY

FHLBNY

Mortgage Delinquencies Continued to Climb in May, But Forbearances Are Edging Lower

Sources: CoreLogic, Mortgage Bankers Association

3.6%

1.7%

0.6%0.3%

1.0%

0.4%

7.3%

3.0% 2.8%

0.5%1.0%

0.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

30+ Days Past Due 30-59 Days Past Due 60-89 Days Past Due 90-119 Days Past Due 120+ Days Past Due In Foreclosure

Mortgage Delinquency Rates

May-19 May-20

22

FHLBNY

FHLBNY

The Most Important Healthcare Data to Watch

23

Source: The COVID Tracking Project

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

U.S. COVID-19 Tests Results Per Day

Tests Conducted (scale left) 7-Day Moving Avg (scale left) Percent Positive (scale right)

FHLBNY

FHLBNY

When Financial Stress Rises, the FHLBNY Stands Ready to Lend

24

Note: Shaded areas denote recessions. Sources: Federal Reserve Bank of Kansas City, FHLBNY estimates

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

-3

-2

-1

0

1

2

3

4

5

6

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Financial Stress & FHLBNY Advances vs. Trend

Kansas City Fed Financial Stress Index (scale left) Advances Vs. Trend (right)

Std Dev $ Millions

FHLBNY

FHLBNY

101 PARK AVENUE • NEW YORK, NY 10178 • WWW.FHLBNY.COM

Advancing Housing and Community Growth

The information provided by the Federal Home Loan Bank of New York (FHLBNY) in this communication is set forth for informational purposes only. The information should not be construed as an opinion,

recommendation or solicitation regarding the use of any financial strategy and/or the purchase or sale of any financial instrument. All customers are advised to conduct their own independent due diligence

before making any financial decisions. Please note that the past performance of any FHLBNY service or product should not be viewed as a guarantee of future results. Also, the information presented here and/or

the services or products provided by the FHLBNY may change at any time without notice.

Brian M. Jones

FHLBNY, Financial Economist

Office: (212) 441- 6802; Mobile (914) 351-8994

brian.jones@fhlbny.com