The global Credit crisis took giant leaps forward this week. With even the euro region’s depleted “core” succumbing, crisis dynamics are now anything but isolated to “periphery” markets and economies. German yields rose after Tuesday’s “disastrous” 10-year bund auction failure. Italy struggled to sell short-term debt, with 6-month bills sold today at 6.50%, up dramatically from last month’s 3.54%. Fitch downgraded Portugal, with 10-year Portuguese yields surging 139 bps. As Irish 10-year yields jumped 150 bps to 9.53%, the market had to question the hopeful view that Ireland had endured the worst. Hungary’s 10-year yields spiked 105 bps this week to 9.44% after Moody’s downgraded the country’s debt rating to junk.
In the face of heightened global market instability, German 10-year bund yields actually jumped 30 bps and UK 10-year gilt yields gained 4 bps this week. Japanese 10-year JGB yields rose 4 bps and the yen dropped 1%, as the marketplace appeared to distance itself from another harbor that had been offering sanctuary from the global financial storm.
As euro disintegration fears intensified, two-year yields became a market focal point throughout the region. Italian 2-year yields spiked 170 bps to 7.77% (7-wk rise of 360bps), with the Italian yield curve turning ominously inverted. Spain saw two-year yields jump 64 bps to 5.96% (3-wk gain 179bps). Banking worries weighed heavily on the euro “core,” with Belgian two-year yields jumping 120 bps to 5.04%. Two-year yields jumped 24 bps in France to 1.83% and 32 bps in Austria to 1.89%. Portugal saw two-year yields surge 329 bps to 17.14%, and Ireland yields jumped 158 bps to 9.35%. Greece’s two-year yields spiked to 110%. It became a panic.
The markets are being forced to come to grips with a distressing reality. Germany likely has neither the will nor even the capacity to bail out the troubled euro region. And it’s reasonable to presume a similar view with respect to the ECB. Meanwhile, the markets are significantly scaling back expectations for the European Financial Stability Facility (EFSF). With market sentiment shifting dramatically against even the top-rated issuers of euro debt, dismal prospects for selling EFSF bonds will limit the capacity to leverage this bailout facility. Ongoing talk - of constitutional changes, greater European integration and more effective fiscal oversight, all engendering a more stable backdrop - rings hollow.
Not many weeks ago hopes were high that the EFSF would be equipped with sufficient firepower to help both recapitalize euro region banks and to “ring-fence” Spain and Italy. Today, the marketplace grapples with how a rapidly expanding hole in European bank capital can be contained, while essentially giving up on Italy and Spain. De-leveraging has already created alarming illiquidity throughout sovereign debt markets, boding ill for ongoing enormous refinancing needs for nations and financial institutions alike.
Hoping to bolster faltering confidence, the Europeans will be moving forward with another bank stress test. Increasingly, however, market fears have gravitated toward bank solvency, derivative and counterparty issues. This, along with the potential for nations to exit the euro – or perhaps even the complete disintegration of euro monetary integration – will create a backdrop where “stress tests” have only less market credibility. Increasingly, even the baseline optimistic scenario is calling for intense austerity at the national level and de-risking and de-leveraging at the banking system (and investor/speculator) level. Economic prospects have deteriorated rapidly throughout Europe and, importantly, in a “developing” world heavily exposed to a tightening of European bank finance.
Here at home, 10-year Treasury yields declined only 5 bps this week, perhaps foretelling a less potent safe haven bid in the world’s leading debt market. With market concern hitting the “safe haven” German bunds (and gilts and JGBs), I would suggest the global crisis did indeed take a giant leap toward a more globalized crisis with sights on our and others’ debt markets. Certainly, the failure of our Congressional deficit “super committee” provides ample fundamental reason for the markets to fear that debt worries are drifting ever closer to our shores. With Fed and global central bank operations having completely distorted the functioning of our government debt markets, I’ve always assumed that Washington would run reckless polices until that day when markets imposed painful discipline.
There is less complacency regarding the ramifications for the European debt crisis. The marketplace now better appreciates the systemic nature of what is unfolding. Problems at Europe’s “periphery” will not be easily resolved by German and French guarantees, eurobonds, a leveraged bailout fund, the ECB or the Chinese. The markets recognize there will be no quick fix, while worries mount that global finance and economies may be much less sound than earlier believed.
Increasingly, the marketplace is moving more in the direction of the bearish view of things, a viewpoint not long ago disregarded as misplaced and alarmist. I have worried that the market’s expectation for German and ECB capitulation has been poised for disappointment. It has been my view that the markets have been much too complacent with respect to debt crisis global ramifications. While the issue is not yet settled, I see increasing confirmation that “developing” Credit systems and economies are much less resilient than the markets have assumed. I am more confident in the analysis that several years of rampant excess have left the “developing” world much more vulnerable to the unfolding crisis than it was back in 2008.
The backdrop is fraught with extraordinary uncertainty. It appears that Greek debt restructuring is coming to a head. Huge loses will be imposed on Greece’s bond holders, while efforts by the ECB and others to ensure that a “voluntary” write down would not trigger a payout in the Credit default swap (CDS) marketplace will be in vain. The EU and IMF must soon make a decision on funding the next bailout tranche.
The markets are now on daily watch to see if things continue to spiral out of control in Italy and Spain. The high degree of systemic stress that arose this week has market participants conditioned to expect a policy response. With the euro and “developing” currencies under intense selling pressure, the dollar index jumped to its high for the year. Dollar strength further pressures de-leveraging, de-risking and the reversal of “dollar carry trades” (short the dollar and use proceeds to leverage in higher-returning global assets). Some analysts, including myself, view dollar strength as raising the probability for QE3 operations from the Bernanke Fed (additional quantitative easing would be expected to pressure the dollar lower).
I don’t believe that the expanding nature of global market illiquidity is garnering the attention it deserves. And it’s difficult to envisage a scenario where the liquidity backdrop doesn’t deteriorate further. European banks are likely still in the early innings of their historic retrenchment. With financial implosion risk seemingly growing by the day, I fear an escalating crisis of confidence with respect to derivatives and counterparty issues. This is a major issue for global financial institutions and the vulnerable global leveraged speculating community.
Whether it is CDS or derivative protection more generally, a deteriorating risk versus potential return backdrop would seem to point to the ongoing liquidation of risk asset exposures attained through - or hedged by - derivative products. For too long, market participants have tolerated illiquid holdings because of the perception of readily available liquid and inexpensive derivative “insurance”. This epic market distortion created egregious speculative leveraging throughout the global system - and attendant acute fragility that is increasingly on display. I would not be surprised by some announcement of concerted international policymaker measures to bolster confidence in global market liquidity. The financial breakdown scenario is no longer outrageous. The global crisis has afflicted the core, with literally tens of Trillions of sovereign debt and banking system obligations now in the markets’ bad graces.
For the Week:
The S&P500 sank 4.9% (down 7.9% y-t-d), and the Dow lost 5.0% (down 3.0% y-t-d). The Morgan Stanley Cyclicals were hit for 6.6% (down 14.5%), and the Transports fell 6.8% (down 11.2%). The Morgan Stanley Consumer index declined 3.2% (down 7.3%), and the Utilities dropped 3.6% (up 5.0%). The Banks were down 7.5% (down 33.2%), and the Broker/Dealers were hit for 4.4% (down 37.1%). The S&P 400 Mid-Caps fell 6.0% (down 7.6%), and the small cap Russell 2000 sank 8.0% (down 15.0%). The Nasdaq100 lost 4.8% (3.0%), and the Morgan Stanley High Tech index was down 6.0% (down 14.3%). The Semiconductors sank 7.9% (down 16.4%). The InteractiveWeek Internet index lost 6.8% (down 13.2%). The Biotechs declined 3.3% (down 22.8%). With bullion down $40, the HUI gold index fell 4.8% (down 7.8%).
One and three-month Treasury bill rates ended the week at about a basis point. Two-year government yields were down about one basis point to 0.27%. Five-year T-note yields ended the week down one basis point to 0.91%. Ten-year yields declined 5 bps to 1.96%. Long bond yields fell 7 bps to 2.90%. Benchmark Fannie MBS yields were 8 bps lower to 3.07%. The spread between 10-year Treasury yields and benchmark MBS yields narrowed 3 bps to 111 bps. Agency 10-yr debt spreads were little changed at 4 bps. The implied yield on December 2012 eurodollar futures rose 4.5 bps to 0.855%. The two-year dollar swap spread jumped another 5 bps to 55 bps (high since May '09). The 10-year dollar swap spread increased 2 bps to 20 bps. Corporate bond spreads widened further. An index of investment grade bond risk jumped 9.5 to 147.5 bps (2 bps shy of 2011 high). An index of junk bond risk surged 77 bps to 837 bps.
Debt issuance slowed sharply for this holiday-shortened week. Investment-grade issuance this week included Bank of America $3.0bn and UPMC Health System $100 million.
Junk bond funds saw outflows surge to $2.2bn (from Lipper). Junk issuance included Sesi $800 million.
Convertible debt issuers included Lennar $350 million.
I saw no international dollar bond issues.
Italian 10-yr yields ended the week 61 bps higher to a 14-year high 7.24% (up 243bps y-t-d). Spain's 10-year yields rose 32 bps to 6.67% (up 123bps). Greek two-year yields ended the week up 928 bps to 110% (up 9,799). Greek 10-year yields surged 149 bps to 28.10% (up 1,564bps). German bund yields jumped 30 bps to 2.26% (down 70bps), and French yields increased 22 bps to 3.68% (spread to bunds narrowed 8 to 142bps). U.K. 10-year gilt yields rose 4 bps this week to 2.29% (down 122bps). Ten-year Portuguese yields jumped 139 bps to 12.32% (up 574bps). Irish yields spiked 145 bps higher to 9.47% (up 41bps).
The German DAX equities index sank 5.3% (down 20.6% y-t-d). Japanese 10-year "JGB" yields jumped 8 bps to 1.02% (down 10bps), the largest weekly yield rise since January. Japan's Nikkei fell 3.8% (down 20.2%). Emerging markets remained under pressure. For the week, Brazil's Bovespa equities index fell 3.2% (down 20.8%), and Mexico's Bolsa sank 4.7% (down 10.1%). South Korea's Kospi index dropped 3.4% (down 13.4%). India’s Sensex equities index sank another 4.1% (down 23.5%). China’s Shanghai Exchange declined 1.5% (down 15.2%). Brazil’s benchmark dollar bond yields were little changed at 3.49%, while Mexico's 10-year peso bond yields surged 28 bps to 6.78%.
Freddie Mac 30-year fixed mortgage rates declined two bps to 3.98% (down 42bps y-o-y). Fifteen-year fixed rates dipped one basis point to 3.30% (down 47bps y-o-y). One-year ARMs sank 19 bps to 2.79% (down 44bps y-o-y). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down 2 bps to 4.67% (down 57bps y-o-y).
Federal Reserve Credit dropped $11.7bn to $2.808 TN. Fed Credit was up $401bn y-t-d and $491bn from a year ago, or 21%. Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 11/23) rose $3.0bn to $3.457 TN (10-wk decline of $18.4bn). "Custody holdings" were up $106bn y-t-d and $115bn from a year ago, or 3.5%.
Global central bank "international reserve assets" (excluding gold) - as tallied by Bloomberg – were up $1.221 TN y-o-y, or 18.1% to $10.245 TN. Over two years, reserves were $2.708 TN higher, for 36% growth.
M2 (narrow) "money" supply increased $4.7bn to a record $9.655 TN. "Narrow money" has expanded at a 10.5% pace y-t-d and 10.1% over the past year. For the week, Currency increased $3.0bn. Demand and Checkable Deposits dropped $13.0bn, while Savings Deposits jumped $20.6bn. Small Denominated Deposits declined $3.0bn. Retail Money Funds fell $2.9bn.
Total Money Fund assets were little changed last week at $2.646 TN. Money Fund assets were down $164bn y-t-d and $167bn over the past year, or 5.9%.
Total Commercial Paper outstanding was unchanged (19-wk decline of $237bn) at $1.00 TN. CP was down $28bn y-t-d, with a one-year decline of $66bn.
Global Credit Market Watch:
November 25 – Bloomberg (Emma Ross-Thomas): “Spain and Italy face paying more to borrow for two years than for a decade, echoing shifts that presaged Greece and Portugal seeking aid and suggesting skepticism about their new governments avoiding contagion. Italian two-year bond yields rose to a record today and top those on 10-year debt, while the gap between Spain’s two- and 10-year securities has halved in a month to a three-year low of just 70 bps… ‘Once it’s inverted it’s a sign the market is expecting something quite profound in terms of haircuts or default risk,’ Harvinder Sian, a fixed income strategist at Royal Bank of Scotland Plc said. ‘It’s another dynamic in the fact that these are very distressed markets.’”
November 25 – Financial Times (Neil Dennis): “Italy’s borrowing costs shot higher on Friday as Rome was forced to pay euro-era high interest rates to investors in what analysts called an 'awful' auction of short-term debt. Yields on two-year bonds jumped above 8% after an auction of this debt and six-month bills raised the full targeted €10bn but at the cost of sharply higher yields."
November 22 – Bloomberg (Angeline Benoit): “Spain’s three-month borrowing costs doubled at an auction of 2.98 billion euros ($4.03bn) of bills in the first test of confidence in Prime Minister-elect Mariano Rajoy… Spain sold three-month bills at an average yield of 5.11%, compared with 2.292% the last time they were sold on Oct. 25.”
November 25 – Bloomberg (David Goodman): “The cost of insuring against default on European sovereign and financial company debt rose to records as the euro-region’s crisis deepened with Italy paying the highest yields to sell short-dated bills in 14 years.”
November 23 – Bloomberg (Gabi Thesing and Jeff Black): “Mario Draghi is getting even more resistant to using the European Central Bank’s printing presses. As the debt crisis worsens, the ECB’s president is turning the tables on governments that are asking the central bank to pledge unlimited funds to cap soaring borrowing costs… ‘Berlusconi’s U-turn confirmed to a lot of Governing Council members what the Bundesbank in particular have been stressing all along, that as soon as the ECB does something, governments stop making any effort,’ said Christian Schulz, a former ECB economist…”
November 22 – Bloomberg (Brian Parkin and Tony Czuczka): “Germany is standing pat in Europe’s debt crisis, rejecting calls from allies and investors to do more to counter market turmoil, said Michael Meister, a senior lawmaker in Chancellor Angela Merkel’s coalition. ‘We don’t have any new bazooka to pull out of the bag,’ Meister, the Christian Democratic bloc’s finance spokesman and deputy leader in parliament, said… ‘We see no alternative to the policy we are following,’ which calls for budget cuts and keeping the European Central Bank from becoming a lender of last resort, he said…”
November 21 – Bloomberg (David Goodman): “The cost for European banks to fund in dollars rose to the highest levels since 2008... The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 139 bps below the euro interbank offered rate… the most expensive since December 2008…”
November 23 – Financial Times (David Oakley, Tracy Alloway and Ralph Atkins): “Eurozone banks raised sharply their borrowing from European Central Bank on Tuesday, with lending hitting a new high for the year amid signs banks are being shut out of private markets. The ECB lent almost €250bn to eurozone banks in its weekly tender, the highest amount in 2011, as traders said more banks were finding it harder to access wholesale funding because of concerns over their creditworthiness. ‘The bank lending markets have never been as stressed as this, or not since the collapse of Lehman Brothers [in 2008]. We are talking about a credit crisis, not a liquidity crisis. There is plenty of money out there, but more and more banks are deemed too great a risk to lend to,’ said a money markets broker. The ECB is becoming an increasingly important source of funding for eurozone banks as the sovereign debt crisis has deepened with banks borrowing €247bn… an increase of €17bn from the previous week and up €52bn compared with two weeks ago. The number of banks participating in the tender also rose, from 161 a week ago to 178…”
November 23 – Bloomberg (Anne-Sylvaine Chassany, Simon Packard and Neil Callanan): “European banks, vowing to sell distressed assets as regulators tighten capital requirements, are lending money to buyers to get deals done. Royal Bank of Scotland Group Plc may provide as much as 600 million pounds ($939 million) in debt to help Blackstone Group LP acquire part of a 1.4 billion-pound portfolio of commercial mortgages from the bank after the private-equity firm struggled to get outside funding, three people with knowledge of the transaction said… ‘The use of vendor financing to de-lever defeats its own purpose,’ said David Thesmar, a professor of finance at HEC Paris, a business school.”
November 22 – Bloomberg (Mark Deen and Paul Dobson): “Investors aren’t waiting for Standard & Poor’s or Moody’s… to strip France, Europe’s second-biggest economy, of its top credit rating. The extra yield demanded to lend to AAA rated France for 10 years was 158 bps more than the German rate at 11:51 a.m. today… French borrowing costs are more than a percentage point above the AAA rated U.K. ‘France isn’t trading like a AAA,’ said Bill Blain, a strategist at Newedge Group… ‘The market has made its judgment already.’”
November 23 – Financial Times (Stefan Wagstyl and Neil Buckley): “Austria’s move this week to impose tight curbs on its banks’ future lending in central and eastern Europe has thrown into sharp relief the potential impact of the eurozone’s sovereign debt crisis. To protect its own triple A credit rating, Vienna has instructed Erste Bank, Raiffeisen Bank International and Bank Austria… to boost capital reserves and limit cross-border loans. The decision came just days after UniCredit announced a review of its extensive businesses in the region, and Germany’s Commerzbank said it would restrict new loans to Germany and Poland only… These are the most difficult times for banking in central and eastern Europe (CEE) since the immediate aftermath of the end of communism.”
November 25 – Bloomberg (Zoltan Simon): “Hungary, which last week turned to the International Monetary Fund for help, lost its investment-grade rating at Moody’s…, which cited risks to budget-deficit and public debt targets.”
November 25 – Bloomberg (John Martens): “Belgium’s credit rating was cut one step by Standard & Poor’s, which said bank guarantees, political instability and slowing economic growth will make it difficult to reduce the nation’s debt load.”
Global Bubble Watch:
November 22 – Bloomberg (Heidi Przybyla): “The implosion of the congressional supercommittee is likely to delay any major deficit-reduction agreement until after the next presidential election and may pose an immediate threat to the struggling U.S. economy. The committee’s failure to reach a deal means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year… The panel’s inability to agree on $1.2 trillion in budget cuts… also stoked doubts about U.S. lawmakers’ ability to overcome partisan gridlock and safeguard the nation’s fiscal health.”
November 20 – Financial Times (Jamil Anderlini): “Wang Qishan, the Chinese vice-premier responsible for overseeing the financial sector, has predicted the global economy will slump into long-term recession and warned that China will need to deepen financial reforms to cope with the fallout. ‘Right now the global economic situation is extremely serious and in a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time,’ state media reported Mr Wang as saying...”
November 23 – MarketNews International: “Regulators need to reconsider the zero-risk weighting that financial institutions are allowed to assign to their holdings of government bonds, ECB Governing Council Member Luc Coene said… Current rules mean that banks don't need to set aside any capital to cover the risk of holding government bonds, but the sovereign debt crisis has clearly shown that this practice needs to be reconsidered, Coene said… ‘We must make sure this issue is adequately recognized by regulators,’ he said. Requiring banks to hold capital against their government bond holdings ‘will obviously have an impact on many banks balance sheets’, he warned.”
Currency Watch:
The U.S. dollar index jumped 2.0% to a 2011 high 79.61 (up 0.7% y-t-d). On the downside, the Taiwanese dollar declined 0.6%, the Singapore dollar 1.0%, the Japanese yen 1.1%, the Swiss franc 1.4%, the Canadian dollar 1.8%, the Danish krone 2.0%, the euro 2.1%, the New Zealand dollar 2.1%, the British pound 2.3%, the Norwegian krone 2.3%, the Australian dollar 3.0%, the Swedish krona 3.2%, the Mexican peso 3.5%, the South African rand 4.0%, and the Brazilian real 5.6%.
Commodities and Food Watch:
The CRB index declined 2.2% this week (down 8.2% y-t-d). The Goldman Sachs Commodities Index fell 1.9% (up 0.7%). Spot Gold declined 2.3% to $1,684 (up 18.5%). Silver sank 4.0% to $31.09 (up 1%). December Crude slipped 90 cents to $96.77 (up 6%). December Gasoline declined 1.2% (down 0.2%), while December Natural Gas rallied 6.8% (down 20%). March Copper sank 4.0% (down 26%). December Wheat fell 4.0% (down 28%), and December Corn dropped 4.5% (down 7%).
China Bubble Watch:
November 23 - Dow Jones: “China overtook the U.S. as the world's No. 1 smart-phone market by volume in the third quarter, a research report by Strategy Analytics shows. According to the report, shipments of smart phones in China grew 58% sequentially in the third quarter to reach 24 million units. In the U.S., smart-phone shipments fell 7% on the quarter, reaching 23 million units.”
Japan Watch:
November 25 – Wall Street Journal (Takashi Nakamichi): “The International Monetary Fund warned in a new report that market concerns over fiscal sustainability could trigger a ‘sudden spike’ in Japanese government bond yields that could quickly render the nation's debt unsustainable as well as shake the global economy.”
November 21 – Bloomberg (Andy Sharp): “Japan risks falling into a similar sovereign-debt crisis as Europe if it doesn’t get the world’s ‘worst’ public debt situation in order, a former finance minister said. ‘What’s happening in Europe could take place someday in Japan,’ Hirohisa Fujii, chairman of the ruling Democratic Party of Japan’s tax commission, said… Politicians must understand Japan has the world’s worst debt situation.’ Japan’s public debt is projected to reach 228% of gross domestic product in 2013, around double the average forecast for Group of 20 nations…”
India Watch:
November 22 – Bloomberg (Jeanette Rodrigues and Anoop Agrawal): “India’s rupee fell to a record, prompting the central bank to say it’s weighing action to stem the decline.”
November 23 – Bloomberg (Jeanette Rodrigues, David Yong and Lilian Karunungan): “Investors are cutting their holdings of Indian debt as the weakening rupee, Asia’s worst-performing currency this year, stymies Finance Minister Pranab Mukherjee’s efforts to boost inflows.”
November 25 – Bloomberg (Joshi and Anoop Agrawal): “India’s companies cut borrowings in the global syndicated-loan market by 87% this month as the rupee’s drop to a record low increases the cost of servicing overseas debt.”
Asia Watch:
November 25 – Bloomberg (Jiyeun Lee): “South Korea’s won posted its fourth weekly loss as Europe’s debt crisis showed little sign of easing, prompting investors to favor safer assets…”
Latin America Watch:
November 25 – Bloomberg (Francisco Marcelino and Gabrielle Coppola): “The highest Brazilian vehicle loan default rate in more than two years is fueling concern Banco do Brasil SA and Itau Unibanco Holding SA, the nation’s largest banks by assets, may boost provisions for bad loans. Default rates on cars, motorcycles and trucks in October rose to 4.7%...”
November 25 – Bloomberg (Nathan Crooks and Jose Orozco): “Venezuelan President Hugo Chavez’s move to expand price controls this week sparked panic purchases by consumers, leading to shortages of everything from coffee to toilet paper. People are buying more than they need to stock their homes and resell the products at a profit in the black market, Food Minister Carlos Osorio said…”
U.S Bubble Economy Watch:
November 21 – Bloomberg (Heather Perlberg): “Passengers are paying an average of 6% more this year for round-trip flights during the U.S. Thanksgiving holiday as airlines reduce their available seats to maintain pricing power.”
November 21 – Bloomberg (Eben Novy-Williams): “The University of Maryland plans to cut eight sports to save money, school President Wallace D. Loh said… Men’s cross country; tennis; swimming and diving; indoor track, and outdoor track are to be eliminated, as well as women’s water polo; acrobatics and tumbling, and swimming and diving.”
Central Bank Watch:
November 23 – Bloomberg (Gabi Thesing): “Bundesbank board member Carl-Ludwig Thiele said the euro-area’s debt crisis poses the biggest threat to financial stability in the currency bloc and that it’s not the task of a central bank to fix it. ‘Trust is the irreplacable basis of a healthy financial system,’ Thiele said… ‘But the central banks cannot restore the trust between creditor and debtor if that has broken down. That is particularly the case if the debtor is a nation.’ He also said central banks cannot monetize government debt.”
Muni Watch:
November 25 – Bloomberg (Esmé E. Deprez): “Municipal borrowers may sell 20% more long-term debt next year compared with 2011 as yields sink to near historic lows, according to Peter DeGroot, head of municipal research at JPMorgan… As much as $350 billion of bonds maturing in more than 12 months may be sold in 2012, compared with $291 billion projected for this year…”