- Fund flows: Investors added $1.25 billion from municipal bond mutual funds in the week ended Jan. 7, 2026, according to the Investment Company Institute. The prior week saw $407 million in inflow. This is a clear indication of SMA’s buying of paper within the markets. We continue to buy on the longer end of the curve, with 4-5 years of call protection. Should you not be seeing product that meets your investment objective, please reach out to us.
- A slew of Federal Reserve officials spoke to the importance of central bank independence on Wednesday in response to questions about the news that the US Department of Justice’s issuance of subpoenas to the Fed, focused on a costly building renovation, and about Fed Chair Jerome Powell’s congressional testimony last year about the project. Among those, Minneapolis Fed President Neel Kashkari became the first policymaker to explicitly back Powell’s counterclaim that the DOJ’s investigation was a pretext for putting more pressure on the central bank on interest rates. I have my own thoughts and do agree that the FED will need to remain independent. With the latest charges against Powell, this is muddying that water, and most likely taking the FED’s eye off the ball. We would be cautious about trading against this type of activity in FED Funds.
- The chances of a rate cut this month are slim. PPI numbers were slightly off from expectations. I would expect a “no change” on rates for January, I would expect a cut in the Spring, and another before the midterms.
- If you are buying CA paper, California Governor Gavin Newsom proposed a $349 billion budget for the fiscal year that begins in July that leans on steadier economic growth and resilient financial markets to keep the state’s projected deficit to about $3 billion, a far smaller gap than earlier estimates. The plan unveiled Friday includes $248 billion in general fund spending, about $11 billion more than the current year, as revenue rebounds on stronger cash receipts, elevated stock prices, and a more favorable economic outlook, according to the administration. California’s progressive tax system leaves the budget especially sensitive to market swings, with the top 1% of taxpayers accounting for nearly half of personal income tax collections.
- Bond traders all but wiped out their bets that the Federal Reserve would cut interest rates later this month after the unemployment rate for December fell more than expected. A resulting selloff in short-maturity Treasuries — more sensitive than long-maturity tenors to Fed rate changes — lifted the two-year note’s yield by nearly five basis points to the highest level this year. Bond traders maintained an outlook for two rate cuts overall in 2026, with the first seen by mid-year. We are thinking we will see 3 cuts this year, perhaps more, depending on who takes over the FED chair in May.
- As we know, US employers added fewer jobs than expected in December, capping a yearlong slowdown in the labor market defined by cautious hiring and limited layoffs. Nonfarm payrolls increased 50,000 last month after downward revisions to the prior two months, according to Bureau of Labor Statistics data out Friday. The unemployment rate edged down to 4.4%, settling back after the record-long government shutdown. Overall, we think economic growth will continue to slow down over the next couple of months… sparking the thoughts of cuts as we move through the first quarter.
- We reported on this 1/12 – US state and local debt with long maturities offer “compelling” value in this less crowded corner of the market, according to the municipal investment arm of MacKay Shields. So-called separately managed accounts (SMAs) are major players in the muni space that offer customized portfolios to retail investors, and tend to prefer securities that come due in a decade or less. That leaves long-dated bonds looking attractive, especially bonds maturing in 12 to 22 years, according to a report by MacKay Municipal Managers. Bottom line, we align with this thought. If you are buying to lock in yields with quality, we feel this is a good entry point.
Securities offered through NewEdge Securities, LLC, member FINRA and SIPC. The DRL Group is not a subsidiary or control affiliate of NewEdge Securities, LLC. NewEdge Securities, LLC. has no affiliation to BondDesk Trading LLC or BondTrader Pro, or Tradeweb Direct, Bondpoint, TMC, Market Axess or any ECN.
Yield to call (YTC) is not indicative of total return; this yield is valid only if the security is called. Bonds may or may not be called, or be callable on multiple dates or, in other cases, called any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at anytime without notice.
Do not buy bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the claims paying ability of the insurance company.
Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower rated bonds, carry a greater potential risk of default & should be considered by sophisticated investors only.
This document is for informational purposes only and does not replace or serve as a substitute for your official monthly statement generated by NFS. Please refer to your official statement for accurate and comprehensive account details.
Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. NewEdge Securities, LLC. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule, please consult with your tax advisor for further clarification.
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