Broker Check

Market News & Commentary - From the Desk of David Loesch 03.21.2024

March 20, 2024

 

  • President Biden has proposed raising income taxes on higher earners while establishing a minimum tax rate of 25% of households worth at least 100MM. This move is bold in an election year; I think the current administration would leave taxes alone until after the election. However, the fact is that tax rates will increase no matter who takes control of the office. With the amount of spending we have incurred, there is no way around this. Higher tax rates will add to the appeal of tax-free municipal bonds.
  • The 2 and 5 yr. T bill yields have climbed to the highest levels this year as swap traders forecast fewer FED cuts in 2024. This forecast adjustment is likely one reason why yields increased last week. I think this will continue as we move into late Spring.
  • Now that the unemployment rate is 3.90%, business surveys show a souring sentiment regarding hiring and new orders. The 10-yr T has risen almost 40bps since the January FOMC meeting. Some economists suspect Powell will remain dovish at the next meeting; I expect more members will move in that same direction next month.
  • Visible supply finishes the week at $5.85B, well below the year-average of $8.35B. This is typical; this number will likely increase over the next week. This supply level should help yields over time; however, we should be in this trading pattern for a while.
  • Fund Flows remain positive, coming in at $295MM for the week. Mutual funds seek paper and look to buy across the curve depending on the fund's objective. What is this telling you? Investors are buying bonds.
  • The DRL Group has been saying for a while, "Rate cuts will not happen until late summer," I am surprised that some thought it would be March. The last round of inflation numbers was higher than forecasted. Overall, yields are up ~9bps this week across the board, and we could move up another +5 next week, too. The bottom line is that rate cuts are expected later this year.

 


 

 


 

 

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)

 

 

 

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