- Early turnout is at a record high for Georgia Senate seat run-offs
- Congress votes on spending and pandemic aid bills
- U.S. Q3 GDP expected unrevised
- Dec U.S. consumer confidence expected to show a modest increase
- U.S. existing home sales expected to fade slightly from 15-year high
- 5-year TIPS auction to yield near -1.55%
Early turnout is at a record high for Georgia Senate seat run-offs — Georgia voters clearly understand that control of Washington is within their hands as they turn out in droves to vote early in the run-off elections on January 5 for the two Georgia Senate seats. Bloomberg reports that 1.5 million Georgia residents have already voted early, either in person or by mail, which represents 30% of total turnout of about 5 million seen in the November 3 election.
The early voting so far favors Democrats by a small margin, although that might not be enough to overcome the tendency of Republican voters to vote in person on election day. Most political observers believe the outcome of the Georgia races will depend mostly on which party can turn out the most voters.
The polls for the Georgia run-off elections are extremely close and are within the polling errors. The latest poll-of-polls data from FiveThirtyEight, show the Perdue-Ossoff race at 48.8%-48.2%, respectively, and the Loeffler-Warnock race at 48.5%-48.4%. However, major polling companies are sitting out the Georgia run-off elections. The few Georgia polls that have been conducted are of questionable quality, leading to even less confidence than usual about the accuracy of the polls. The betting odds at PredictIt.org, for whatever they are worth, are at 75% for Republican control of the Senate after the Georgia run-off elections and 26% for Democratic control.
Congress votes on spending and pandemic aid bills — The House Monday evening approved the $900 billion pandemic aid bill and the omnibus spending bill that funds the U.S. government for the remainder of the fiscal year (through Oct 31, 2021). The Senate was expected to approve the bill later Monday night, forwarding the bill to President Trump for his signature before the midnight deadline for a government shutdown. Senate Majority Leader McConnell said the Senate would not leave Washington for their holiday break until it passed the pandemic aid and spending bills.
Members of Congress today will quickly leave Washington for their holiday break. However, the break will be relatively short because Congress may have to return as soon as January 3 if President Trump makes good on his threat to veto the Defense Authorization bill, forcing Congress to try to override the veto. Congress is expected to override any veto since Congress originally passed that bill by veto-proof majorities.
The new Congress will then assemble on January 6 to fulfill its duty of certifying the Electoral College vote for Joe Biden as President. Inauguration Day is January 20.
The markets remain on guard for whatever President Trump might do in his remaining few weeks in office. The Trump administration yesterday blacklisted another 100 Chinese and Russian companies by putting them on the Treasury’s Entity List. China has yet to retaliate for the Trump administration’s moves to blacklist a host of Chinese companies in recent weeks and sanction Hong Kong political officials.
U.S. Q3 GDP expected unrevised — The consensus is for today’s Q3 GDP to be left unrevised from the last estimate of +33.1% (q/q annualized) and +7.4% (q/q). The GDP rise of +7.4% q/q in Q3 recover only part of the -10.1% plunge seen in the first half of 2020. GDP is not expected to fully recover the first-half loss until Q3-2021.
Looking ahead, the consensus is for a solid GDP gain of +4.6% in Q4 q/q annualized (+1.1% q/q). GDP is then expected to return to more normal growth rates in 2021 with growth of +2.5% (q/q annualized) in Q1, +3.6% in Q2, +3.8% in Q3, and +3.4% in Q4. On a calendar year basis, the consensus is for a -3.5% GDP drop in 2020, followed by growth rates of +3.9% in 2021 and +3.1% in 2022.
Dec U.S. consumer confidence expected to show a modest increase — The consensus is for today’s Dec Conference Board U.S. consumer confidence index to show an increase of +0.9 to 97.0, recovering part of November’s -5.3 point decline to 96.1. Expectations for an increase today are based in part on the already-released news that the University of Michigan’s U.S. consumer sentiment index in early December unexpectedly rose by +4.5 points to 81.4, recovering most of Nov’s -4.9 decline. Consumer confidence remains shaky due the surge in the pandemic.
U.S. existing home sales expected to fade slightly from 15-year high — The consensus is for today’s Nov existing home sales report to show a -2.2% decline to 6.70 million, reversing about half of October’s +4.3% increase to 6.85 million. Existing homes sales in October rose to a 15-year high since demand remains strong from people looking to move out of multi-family units or to move into a larger single-family homes. Home sales are being curbed by the lack of homes on the market. The supply of existing homes available on the market fell to a record low of 2.4 months in October.
5-year TIPS auction to yield near -1.55% — The Treasury today will sell $15 billion of 5-year TIPS. Today’s auction will be the first and only reopening of the 1/8% 5-year TIPS of October 2025 that the Treasury first sold in October. The benchmark 5-year TIPS yesterday fell to a 7-3/4 year low of -1.61% but then recovered to close the day at -1.55%.
The 12-auction averages for the 5-year TIPS are: 2.67 bid cover ratio, $45 million in non-competitive bids, 4.5 bp tail to the median yield, 16.8 bp tail to the low yield, 87% taken at the high yield, and 62.8% taken by indirect bidders (slightly below the median of 63.1% for all recent Treasury coupon auctions).
