Broker Check

Market News & Commentary - From The Desk Of David Loesch 02.15.2024

February 15, 2024


  • With the CPI coming out hotter than expected this week, the road to 2% seems difficult. The silver lining is that core goods disinflation still has room to run. If we continue to have hot numbers, I suspect there will be further pressure on yields. The bottom line is that we never thought there would be a March reduction. We believe it will be late summer and around 75bps this year at the top. We are seeking to buy paper on pullbacks - sticking with quality only.
  • Nuveen stated yesterday that investors “might consider selling the Magnificent 7 and moving money into the MUNI market" as yields continue to offer attractive returns and safety. I tend to agree with this point, and I suspect we will see a move into FI as we march closer to a rate move.
  • The US budget deficit widened in the four months through January as debt servicing costs climbed. The deficit for the first four months of the 2024 fiscal year reached $532B, or 16% more than recorded in the same period last year. Many, including me, wonder about how this could be on a sustainable course, as watching this continues to baffle many. These numbers are staggering, and I wonder how long this can continue.
  • Citi stated this week that they see the first rate cut in June and see the potential to mirror what happened in the late 1990s. In 1998, the FED cut three times amid the Russian debt default and the destruction of Long-Term Capital (hedge fund), which failed. After these three moves down, we saw rate increases to contain any inflationary pressures. Again, many were betting on a March cut, which is not going to happen, which is one reason why.
  • Moody’s put a report out this week saying our market is currently in a "Goldilocks" type of pattern; yields are not too hot, not too cold, and just about right. We saw a heavy calendar in January, which was well absorbed by the market. The bottom line is that yields are holding despite the run-up in T bills, as the demand for MUNI paper exceeds supply.
  • The T market absorbed $25B of long bonds at lower-than-forecast yields this week, which soothed nerves about the demand for the T markets. The 30-year paper yielded 4.36% on Thursday compared with a yield of 4.38% moments before the bidding deadline.

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.

 

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

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