- 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 06.18.2020Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on June 18th, 2020
- The FED is buying Corp debt and currently on a buying spree, which is fueling a rally in the taxable MUNI market. Sales of taxable bonds by states, cities, colleges, and hospitals have surged this year because rates have fallen so low. These taxables are a viable alternative to MUNI's, which also carry fed regulations limiting how funds are spent. This activity has opened a disconnect between the two fixed income markets, with the taxable MUNI markets moving up in price significantly. I believe taxable munis will stick out as an asset class, and depending on how the FED buys bonds, it will keep yields relatively depressed throughout the summer.
- The FED’s pledge in March to buy Corp debt started with buying ETF's, yesterday they indicated they would be purchasing "individual" Corp bonds as they move through the program. This decision will continue to pump money into that market. I believe we will see all Fixed-Income markets rally with this news. As these programs "get started," it will push the confidence levels up for both the street and retail.
- Fund flows continue to be healthy; investors added a record $3.49B to MUNI bond mutual funds in the week ended June 10 - this will continue and lead pricing to move up. I expect this trend to continue throughout the summer.
- Data reflecting the early stages of the re-opening of the US economy points to a slightly quicker and somewhat sharper rebound going into the 2H of 2020. Many economists now see a steeper acceleration in the 3Q following the dive in the second Q of 2020. I believe there is validity to this, however not until the end of this year. Right now, it seems like MUNI's are on a path to continue to move up, as mentioned previously.
- The record volatility in our markets in March may be causing more cash-strapped governments to borrow directly from banks. The number of MUNI securities filings that report “new obligations” (a category that includes bank loans) has increased dramatically this year to 471 in May. This number is more than twice the average. Overall, this is a neutral to slightly negative for our markets, as bank loans are hard to track and, most of the time, are senior to all other debt.
- The Trump administration is preparing a nearly $1T infrastructure proposal to continue to push our economy back to life. This plan will be used for infrastructure improvements and will be broad, focusing on improving the lives of Americans in rural areas. Since Trump took office, he has been a proponent for passing bills like this, and he will push this bill through, the questions will be if the Dem's will "go for this."
- As we move through the pandemic, we are starting to see convention centers downgraded. S&P downgraded WA State Convention Center by four notches to BBB+. They also indicated they would be looking at other convention centers such as San Antonio, Houston, and Denver next.
605-B Park Grove
Katy, TX 77450
This report has no regard to the specific investment objectives, financial situation, or needs of any specific 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 bonds that are non-rated (NR) 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.