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Market News Commentary - From The Desk of David Loesch 03.05.2020Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on March 4th, 2020
- With Biden's success on Super Tuesday, the markets feel better with Warren out, and Sanders seeming to be too radical for the US population. Of course, this is politics, and anything can happen, but as it stands now, it is looking like a "traditional" debate setting up with Biden verse Trump. The markets will like this matchup. The bond market will most likely fade on this political news.
- With the FED rate cut, the markets did not react like one might have thought. With these historic levels on the T markets, there is a slight disconnect between Muni's and T bills. I think the market overall was expecting a more coordinated and decisive response from all monetary policy leaders, not just our FED. The FED, being proactive, and focused on the overall economy, will eventually help all markets. Having the attitude of "full containment" of this virus and the need for a quick-fix is unrealistic.
- Overall, after viewing the comments from yesterday, Powell does not seem very upbeat; he knows that cutting rates will not solve the issue. MUNI’s will most likely fade back here a bit as we’ve had a tremendous run, and it is only natural to see this change.
- Jobless claims are coming out 3/5 and expected to rise based on the virus. Prior claims have been hovering near half-century lows for the past year. Again, I do not think this will move our markets unless it is a significant change.
- Corporate bonds continue to weaken as we moved through last week. Many believe this will continue if the market shows weakness. There is a large disconnect currently between MUNI's and corps. As stocks continue to tumble on speculation that the spreading epidemic could drag the world economy into a slowdown, corporates will continue to take a hit.
- As an issuer, it is a great time to borrow money as it is essentially "free" right now. There will be serval new issues hit the market over the next 30 days.
- Fund flows continue to be healthy, with overall MUNI's at all-time lows on yields, and it is hard to "swallow" where these prices are now; however, retail is looking at this as "what are my options?" Many buyers are very skittish about the equity markets, along with the global impact of various items such as Coronavirus, elections and the overall rates of foreign countries, MUNI's and corps look very good currently.
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