Yields up ~10bps across the curve over the past two weeks. We have been telegraphing a pullback for the last few weeks and are starting to see this now.
• Bond traders are growing convinced that US Treasury yields are on the brink of returning to how they have traded for most of their existence, seeing the 10T steepening. Inversions are not typical; however, until we see some "consistent" data from the economic numbers, we will continue to see the curve steepen based on recent activity. Overall, yields have moved up over the past two weeks. We think we will see a 4.25% on the 10-year T until it settles in.
• Blackrock told their investors to approach the start of 2024 with prudence as US policymakers will likely wait until midyear to start cutting rates. They are urging patience to start the year and look for better buying opportunities late in the first quarter or early in the second quarter. We have also been of this opinion, letting our accounts and prospects know we should see a pullback in yields (higher) as we have had a run-up over the last 75 days. However, the peak (as Blackrock indicated yesterday as well) is behind us in yields, and we will see rate cuts this summer.
• Why are yields moving? Applications for unemployment benefits unexpectedly dropped last week to the lowest level in more than a year, underscoring the labor market's resilience. The job sector has finally reached pre-pandemic levels. It took almost four years for it to recover. There have been 21 months of growth. The bottom line is that labor remains tight; this is one of the main reasons (along with the supply chain) we are seeing yields move up.
• Bloomberg recently published an article stating that jobless claims data should not be taken at face value. These numbers are at historical lows, and the 525bps move over the past 2.5 years did little to shake it up. Bloomberg analysis finds claims are suppressed by a historically low percentage.
• Atlanta FED president Bostic urged policymakers to proceed cautiously regarding rate cuts. We have all FED members speaking of rate cuts; however, I think they are all trying to "set expectations" on when that cut will transpire, and the market got a bit too ahead of itself.
• Municipal bond funds are experiencing a positive shift in demand as retail investors respond to the significant rally in state and local government debt. Last week, investors added almost $900 million to municipal bond funds, the highest weekly inflow in a year.
• Bill Gross, the co-founder of PIMCO, indicated this week the FED should stop widening its balance sheet and start to cut rates. In his opinion, the FED does not have the right philosophy, nor is it taking the correct policy actions, which could push us into a recession. Gross has lost a lot of followers over the past few years; however, he is still well-versed in the Fixed Income markets.
At The DRL Group, we specialize in helping high-net-worth investors maximize tax-free returns by proactively maintaining their custom bond portfolios through all market conditions.
We would love the opportunity to visit with you further. Please click here to schedule a call with one of our specialists or contact us at 281-398-8600.
605-B Park Grove
Katy, TX 77450
New Edge Securities, Inc. has no affiliation with Bond Desk Trading LLC, Bond Trader Pro, Tradeweb Direct, Bondpoint, TMC, or any other ECN. Yield to call (YTC) does not indicate total return; this yield is valid only if the security is called. Bonds may or may not be called or be callable on multiple dates or, in other cases, called on any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at any time without notice. Do not buy discount bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the insurance company's claims-paying ability. Non-rated (NR), Withdrawn (WR), or below investment grade bonds, lower-rated bonds carry a greater potential risk of default & should be considered by sophisticated investors only. Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. New Edge Securities, Inc. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule; please consult your tax advisor for further clarification.
As with any investment, the market value may vary during the period the investment is held. Subject to prior sale and market conditions. This offering is in limited quantity. Please take advantage of them before they are gone.
This report does not regard any particular recipient's specific investment objectives, financial situation, or needs. 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 to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., 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. NewEdge Securities, Inc. 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. Municipal income may be subject to state and local taxes and 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. Non-rated bonds (NR) should only be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.
Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer and member of FINRA/SIPC.
The DRL Group is not a registered entity, subsidiary, or control affiliate of NewEdge Securities, Inc.
Bonds are subject to market and interest rate risk if sold before maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.
Bonds could also be subject to the De Minimis Rule; please consult your tax advisor for further clarification.
Reminder: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not e-mail orders with time-sensitive instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private; it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.
Call us at 281-398-8600 to invest in these or any of our other offerings today.