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

Looking for a Light

at the End of the Tunnel

June 11, 2020

Presented by: Brian Jones, Financial Economist

FHLBNY

FHLBNY

Q2 Real GDP Projections, While Dour, Remain in Flux

-34.4%

-37.7%

-53.8%

-25.5%

-34.3% -35.0%

-27.9%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Bloomberg Consensus Congressional BudgetOffice

Atlanta Fed NY Fed GDP Nowcast NY Fed WEI St. Louis Fed April Hours Worked

FHLBNY

FHLBNY

Consensus Expects Economic Expansion to Resume During the Summer

Source: Bureau of Economic Analysis

-1.1

5.5 5.02.3 3.2 3.0

1.30.1

2.0 1.9 2.2 2.0 2.3 2.2

3.23.5

2.53.5

2.91.1

3.1

2.0 2.1 2.1

-5.0

-35.5

15.5

8.0

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

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

FHLBNY

FHLBNY

Labor Markets Have Started to Recover as Segments of the Economy Reopen

Note: Shaded areas denote recessions. Sources: U.S. Department of Labor, Federal Reserve Bank of St. Louis

4

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)

Initial and Continuing Jobless Claims

2,509

3,094

669464

2250

2,425

21

368

-19 -2 -38

33 127

424

1,239

272

-585-800

-400

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

May Changes in Nonfarm Payrolls(thousands, seasonally adjusted)

FHLBNY

FHLBNY

Motor Vehicle Sales Bounced Off Their Record Low in May

5

6

8

10

12

14

16

18

20

22

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Motor Vehicle Purchases(millions, seasonally adjusted annual rate)

Note: Shaded areas denote recession.

Source: Bureau of Economic Analysis

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FHLBNY

Some of the Hardest Hit Service-Producing Industries Are Moving Off Their Bottoms

Source: Calculated Risk

FHLBNY

FHLBNY

Consumers Returning to the Road; Public Transit Will Rebound With Reopenings

Source: Calculated Risk

FHLBNY

FHLBNY

Other Areas of the Economy Will Take Longer to Recover

8

Source: Calculated Risk

FHLBNY

FHLBNY

Core Consumer Inflation Gauges Will Remain Well Below Fed Target in 2020

Notes: Light blue shaded areas denote recessions. Pink shaded area denotes projections.

Sources: Bureau of Labor Statistics and FHLBNY

0.5

1.0

1.5

2.0

2.5

3.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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

%

Core Consumer Inflations Measures(percentage change from year ago)

9

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FHLBNY

Financial Conditions Near Neutral for the First Time Since Late February

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

14-May-20 8-Jun-20 Change

US Financial Conditions -1.26 -0.18 1.08

Money Market Spreads:

TED Spread 27.63 17.34 -10.29

Libor/OIS Spread 33.40 24.79 -8.62

Com Paper/T-Bill Spread 17.56 12.15 -5.41

Bond Market Spreads:

Baa/10-Yr Treasury Spread 274.82 189.82 -85.00

High-Yield/10-Yr Treas Spread 7.50 5.36 -2.14

Muni/10-Yr Spread 61.30 15.95 -45.35

Swaption Volatility Index 66.90 68.88 1.98

Equity Market:

S&P 500 2852.50 3210.36 357.86

VIX S&P Volatility Index 32.61 25.11 -7.50

FHLBNY

FHLBNY

Fed Securities Holdings Stand $2 Trillion Above Their Pre-COVID-19 Level

Source: Federal Reserve Board

11

$0

$1

$2

$3

$4

$5

$6

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

0.13 0.16 0.18 0.18 0.21

0.44

0.87

1.66

0.2 0.20.3

0.4

0.5

0.8

1.2

1.9

0.2 0.30.3

0.4

0.6

0.8

1.2

1.8

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

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

5/14/2020 6/8/2020 3Q20 4Q20 1Q21 2Q21 3Q21 June 3Q21 May

FHLBNY

FHLBNY

NY Factory Activity Contracted at a Slower Rate in May, 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

FHLBNY

FHLBNY

Local Service-Producing Activity Remains Weak, But Firms Less Concerned About the Future

Note: Shaded areas denote recession.

Sources: Federal Reserve Bank of New York, FHLBNY estimates

0

10

20

30

40

50

60

70

80

90

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

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

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

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

Future Business Activity Future Business Climate

14

FHLBNY

FHLBNY

Jobless Claims in the FHLBNY District Have Been Moving Lower

Note: Shaded area denotes 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

2018 2019 2020

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

FHLBNY

FHLBNY

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

Note: Shaded areas denote recessions.

Sources: Mortgage Bankers Association, National Association of Realtors

2.75

3.25

3.75

4.25

4.75

5.25

2014 2015 2016 2017 2018 2019 2020

Mortgage Interest Rates

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

125

150

175

200

225

250

275

300

325

2014 2015 2016 2017 2018 2019 2020

Home-Purchase Mortgage Applications

FHLBNY

FHLBNY

Mortgage Delinquencies Will Climb in Q2, But Forbearances Are Flattening Out

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mortgage Delinquencies & Foreclosures(percentage of all loans outstanding)

Foreclosure Rate Delinquency Rate

Delinquencies: 4.36% - Up from record low 3.77% in 4Q 2019Foreclosures: 0.73% - Lowest Since 1984

Notes: Shaded areas denote recessions.

Source: Mortgage Bankers Association

FHLBNY

FHLBNY

The Most Important Data to Watch

18

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

3/26/2020 4/2/2020 4/9/2020 4/16/2020 4/23/2020 4/30/2020 5/7/2020 5/14/2020 5/21/2020 5/28/2020 6/4/2020 6/11/2020

U.S. COVID-19 Tests Results Per Day

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

Source: The COVID Tracking Project

FHLBNY

FHLBNY

When Financial Stress Rises, the FHLBNY Stands Ready to Lend

19

Note: Shaded areas denote recessions.

Sources: Federal Reserve Bank of Kansas City, FHLBNY estimates

0.39

7,008

-24,000

-18,000

-12,000

-6,000

0

6,000

12,000

18,000

24,000

30,000

36,000

-4

-3

-2

-1

0

1

2

3

4

5

6

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Financial Stress & Total Advances vs. Trend

Kansas City Fed Financial Stress Index (scale left) FHLBNY Advances vs. Trend (scale 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; Home: (914) 944-4393

brian.jones@fhlbny.com