Market News Commentary - From The Desk of David Loesch 12.12.2018Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on December 12th, 2018
Detroit saw little BK penalty as it sold debt on Tuesday 12/4/2018. Bonds were offered at 3.36% on 2020 maturities and 4.95% on 2038 maturities, this is tighter than what was initially anticipated.
The Dow set to fall this Friday morning again on 12/7/2018; as a result of….Trade issues. Many believe the news this week on the “agreement” was lip service and nothing will become of this. Retail is getting whipsawed around based on various news articles; they are trying to “call the bottom” when indeed no one can.
Many wall street economists are drifting apart on the FED; many are betting against the fed in raising rates in 2019, the overall thought was 5 now down to 2, we can conclude that they will move 25bbps in December.
MUNI’s had the best week in a year last week on 12/3/208 amid speculation that the FED will raise rates less than previously anticipated. MUNI securities have gained the past 19 days, the gains have also been helped by investors seeing to reinvest the dividends as they were paid during December. There will be several more calls coming on 12/15 and 12/20
US Representative Steve Stivers (OH) will serve as co-chair of the house MUNI finance Caucus under the next Congress. Stivers will serve as co-chair after IL Rep. Randy Hultgren lost his race to the Democratic challenger in November. Steve will be good for this committee and will fight for MUNI issuance and non-tax issues. Overall this is a great selection as we move into 2019-2020
Both JPM and Goldman see the long end winning in 2019, meaning that buying the longer-dated paper is the trade for the upcoming year. Longer-dated MUNI’s have been the worst performing this year, these securities have been pressured by rising rates and less buying from banks and insurance companies after corp tax rates were cut. With the moderate outlook on rates and increasing speculation of a turn in the economic cycle, this should drive more capital into the longer dated maturities I believe. I tend to agree with this overall trade, 2019 will be a better year for MUNI’s.
10T trading at a 2.89% this AM, Trump indicated that they are having “positive” talks with China on trade and will be some important announcements coming soon. As we move through the week, will be interested to see what the decision will be and how they will impact the markets. Earnings are few and far between now, and no economic news coming for a while until the next FED meeting next week.
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This content is based on the opinions of David Loesch based on his review of articles from Bloomberg.com or CNBC.com.