- Call us at 866-664-4040
- About Us
- Trading Philosophy
- Municipal Bond Offerings
- Municipal Bond News
- Contact Us
- Client Login
Market News Commentary - From The Desk of David Loesch 02.11.2021Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on February 10th, 2021
- States are continuing to slash their deficit forecasts due to the increased revenue stream and unexpected tax flow dollars from our economic recovery. IL is the latest state moving its deficit numbers down to $3B from $5.5B. The Governor attributes this change to the “economy performing stronger than expected." I find it ironic in a market where there seems to be no stopping equities, T bills trading off in general, and our market continues to strengthen.
- Beyond NY and SF, real estate demand is booming in downtowns across America. Families are upgrading to larger suburban homes, taking advantage of record-low mortgage rates. Home prices in the urban US rose 15% in the three months through late January, slightly ahead of the suburbs' annual pace. I suspect this will continue to grow.
- President Biden and White House officials are letting others know about the $1.9T “fast track stimulus” plan they are pushing through both the House and Senate. This deal should positively impact our markets, but not on the Treasury Market due to inflation worries.
- I feel yields will hold steady, but T Bills will move up; it would not surprise me to see the 10T at a 1.25% soon. The disconnect on the MUNI markets and its relation to the T markets directly result from higher taxes and government stimulus. MUNI's should continue to hold +/- 10bps for the near term.
- About 5MM Americans did not make their rent or mortgage payments in December, which translates to 5% of the total US renters and mortgage holders. This fact is one of the most significant shadows hanging over the US economic recovery. One would think this will negatively impact our equity markets and REITS that buy single-family housing units; however, I feel there is currently not enough attention to these significant numbers.
- The average yield on US junk paper dropped below 4% for the first time as investors continue to seek a haven from ultra-low interest rates. For those who did not trade through the 2009–2010-time frames, junk paper was strong in the years leading up, as we are now, in an “ultra-low” rate environment. That market eventually imploded upon itself along with the equity markets. I am not predicting a "crash"; however, it looks very similar. Demand for the high-yield debt has outweighed the supply by so much, that word has it, money managers are calling companies encouraging them to “issue debt.”
- New Issuance continues to be light, putting pressure on yields to move down. Overall, deal-flow seems to be very light for the foreseeable future while funds are seeking paper along with retail investors. With the lack of supply and taxes inevitably going up, we believe yields will continue to grind lower.
605-B Park Grove
Katy, TX 77450
This report has no regard to the specific investment objectives, financial situation, or needs of any particular recipient. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not construed as a solicitation or an offer to buy or sell securities or related financial instruments. Opinions expressed herein are subject to change without notice and the division, group, subsidiary, or affiliate of MACC., which is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to specific categories of investors. MACC accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Income from municipals may be subject to state and local taxes as well as the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility as to principal if the security is not held to maturity. The non-rated (NR) bonds should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.
Securities are offered through Mid Atlantic Capital Corporation (MACC), a registered Broker-Dealer, Member FINRA/SIPC.
The DRL Group. is not a registered entity or a subsidiary or control affiliate of MACC.
Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.
Reminder: Email sent through the Internet is not secure. Do not use email to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not email orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This email is not an official trade confirmation for transactions executed for your account. Your email message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this email, nothing in this message should be construed as a digital or electronic signature.