Market News Commentary - From The Desk of David Loesch 02.25.2021

• The primary MUNI market extended its selloff for two weeks after yesterday, sending yields on the benchmark 10-year securities up by 7bps.  I continue to feel that we will see a 1.50% on the 10T, and our markets will move up another 10bps over the near future.  These new levels are attractive to many.
• PR struck a deal with bondholders to slash the Central Government's debt, a critical step to moving forward.  The new agreement considers the pandemic's economic impact on the US Territory since the terms of the original deal were struck 2/2020.  The goal is to exit bankruptcy in 2021, so they will seek court approval by Fall.  The terms indicate that the GO bonds' bondholders would receive $14.4B, $7B in cash, and the rest through new securities issuance.  This agreement is a significant step for the island, and barring anything unforeseen, this deal will get done.
• San Diego County Regional Transportation Commission sold $537.5MM bonds on Tuesday with a maturity date of 10/2022.  This deal is the first I have seen in a long time with such a short maturity for the entire issue. It is a clear indicator that some expect rates to move back down over the next several months and in line with what many broker/dealers indicate. 
• Democrats are beginning the final push for President Biden’s $1.9T deal this week while dropping any bipartisanship pretense to pass this package quickly. This roll-out will be the first “real test” of the Democrat's full control of the government and will have implications on the rest of Biden's policies.  The House plans to vote as soon as Friday, and the Senate will vote next week.  I suspect this will get done in some form, and you will see T bills continue to move up in yield on fears of inflation.
• Our government will pressure Federal Reserve Chairman Jerome Powell to support the above plan.  He indicated now is not the time to be talking about the timeline for scaling back purchases of T bills and raising rates.  Powell and his team said they do not currently have inflation fears and are more concerned with getting people back to work.  Many, including The DRL Group, feel that the inflation fears are overblown at this time.  With the recent rise in yields in MUNI's, we are heavy buyers; however, we also believe that the ten-year T will move to 1.50% and MUNI's have another 10-15bps to rise in yields.
• Anaheim, CA, had their bonds downgraded by Moody's as the pandemic slows tourism, a significant revenue stream for this county.  Moody's indicated that the Hotel Occupancy Tax Revenues were much lower than anticipated therefore prompting the downgrade. Investors should pay attention to any HOT bonds they purchase due to these reduced revenues. 
• The T yields touched the highest level in more than five years, moving past another historic level on signs of strength in the economy.  The latest move pushed the gap between 5- and 30-year yields to 157.54 bps, the widest since 10/2014.  As indicated, I suspect we will see T markets continue to move up in yield as we move through the spring.  We believe the ten-year T will move to 1.60% and hold steady for around a month.  Overall, we think yields will move back down to the 1.25% range. 

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

281.398.8607 fax

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.