Broker Check

Market News & Commentary - From The Desk Of David Loesch 02.28.2024

February 27, 2024


  • According to Bloomberg's data compilation, long-term municipal bond sales reached $23.5 billion in February. This figure indicates nearly a 30% increase compared to the pace set last year. February 2020 had the highest sales in a decade at $40 billion. Coming soon to the marketplace, $1.5 billion in New York, NY bonds, $812 million for Princeton University, and $419 million in Virginia revenue bonds.
  • Economists have again revised their forecasts for a recession in the United States, citing expectations of a resilient job market and robust consumer spending that will bolster economic growth in the near future. The latest Bloomberg monthly survey of economists reveals that the economy is projected to expand at a 2.1% annualized rate this year, an increase from the 1.5% forecasted just last month. This upward revision is attributed to more robust household demand and increased government spending.
  • Federal Reserve Vice Chair Philip Jefferson emphasized the importance of the Federal Reserve remaining vigilant against excessive interest rate cuts in response to declining inflation. He cautioned that such actions could jeopardize the central bank's primary objective of maintaining price stability. In a speech prepared for the Peterson Institute for International Economics, Jefferson highlighted the risk of over-easing, which could hinder or reverse the progress in restoring price stability.
  • The recent widening of spreads in BBB-rated healthcare bonds and potential margin-related challenges facing the sector might lead to increased interest in bond insurance to access the market and mitigate credit risk. While the use of such insurance, particularly for taxable municipal bonds, has faced hurdles recently, current market conditions may prompt a reassessment of its benefits.
  • Illinois Governor J.B. Pritzker has put forth a plan to achieve full funding for the state's pensions by 2048 to shore up the financial standing of the lowest-rated state in the US. Currently, the five state pension systems suffer from being less than 45% funded due to years of insufficient contributions. These retirement systems carry approximately $142 billion in unfunded liabilities, with a projected increase to 90% funding by 2045 under a 1994 law. Pensions across the US have been a big subject over the last decade; should this plan be approved, this will be good for IL. IL has performed well this year and will continue to do so.
  • JPMorgan Chase & Co. and Wells Fargo & Co. have been designated to underwrite a municipal bond sale totaling $1.3 billion, intended to construct a new bridge in Lake Charles, Louisiana. This deal is potentially hitting the market in the first week of April.

 

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

866.664.4040 (toll-free)

281.398.8600 (direct)

 

Securities are offered through New Edge Securities, Inc., a registered Broker-Dealer, FINRA and SIPC member. The DRL Group is not a subsidiary or control affiliate of New Edge Securities, Inc.New Edge Securities, Inc. has no affiliation with Bond Desk Trading LLC, Bond Trader Pro, Tradeweb Direct, Bondpoint, TMC, or any other ECN.

Do not buy discount bonds based on the Yield-to-Call (YTC). YTC does not indicate total return; this yield is valid only if the security is called. Bonds may be callable on multiple dates or 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). Bonds could also be subject to the DeMinimis Rule; please consult your tax advisor for further clarification. Insured bonds are issued for timely payment of principal and interest only, do not cover potential market loss, and are subject to the insurance company's claims-paying ability. Municipal income may be subject to state, local, and Alternative Minimum Tax (AMT) taxation. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower-rated bonds carry a greater potential risk of default & should be considered by sophisticated investors only.

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