Broker Check

Market News & Commentary - From The Desk Of David Loesch 04.06.2023

April 05, 2023

  • Overall, economies of nearly half of the US states who rely on tourism, such as Hawaii and Louisiana, are flat to slightly down in growth over the last 12 months, another sign rate increases are "working" to curb inflation. It will be important to watch cities that rely on tourism, such as Las Vegas, whose total visors were down 5.90% from January. The DRL Group remains a buyer of credits insured for cities like this, as we see these trading ~10bps cheaper.
  • The new production cuts by OPEC might complicate the FED's rate calculus. Many, including me, believe the FED will hike another 25bps to 5.25% at the May meeting. Some are predicting this will be the last hike of the year. I am not on board with that opinion. Considering the tight labor market, China's re-opening adding to demand, and the risk of higher oil prices, the prospects of a pause look less certain.
  • Vacancies at US employers dropped in February to the lowest since May of 2021, suggesting cooler labor demand in some industries but still indicative of a job market that is too tight for the FED. The number of available positions decreased to 9.9MM from a downwardly revised 10.6MM a month earlier. Overall, these numbers are headed in the right direction and are a positive sign for the FED. As we see in the High-Grade markets, these numbers are adding fuel to the MUNI rally.
  • US banks will likely decrease their investments in MUNIs as the lending institutions face additional regulation following the financial crises sparked by SVB. I suspect banks will continue to buy the asset class for safety and liquidity as we move through the year. The banking sector also sees an opportunity for capital appreciation throughout the year, with yields decreasing.
  • With the recent banking turmoil raising uncertainty, oil prices, and the full impact of past monetary tightening yet to hit the economy, it will be hard to avoid a recession this year. If this happens, MUNIs traditionally perform well.
  • Bloomberg economists' latest recession probability model sees a downturn unfolding as soon as July, two months earlier than the previous version. They are 100% certain a recession is coming. If this happens, MUNIs typically perform well.
  • Long-term MUNI bonds started 2023 at the slowest pace of issuance since 2018, extending a slide that began last year. Sales are down 23% for the 1st Q as state and local governments issues about $74B in long-term debt compared with nearly $100B during the same period last year. This downward trend will continue in April, pushing pricing up in our markets.
  • MUNI bond yields have "see-sawed" in the first Q as borrowing costs fell because of the optimism that the FED was nearing the end of the tightening cycle. The tide turned in February as unexpectedly strong jobs data reignited inflation fears sending yields higher. On the other hand, March was the opposite, with the FED signaling it may be near the end of the tightening cycle. Overall prices increased; retail investors viewed this as an opportunity to see some stability in the marketplace. There are several reasons why The DRL Group does not trade higher-yielding securities. 2023 has been the worst start in over a decade for hospital impairments, meaning various hospitals broke their covenants due to a lack of funds. Bonds of 8 hospitals have breached their DSC over the past three months, and I suspect there will be many more throughout the year. The rise in rates makes it difficult to refund an outstanding issue that should be refunded (hospital bonds) under "normal" circumstances. We continue to steer clear of this credit.


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.


David Loesch

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)


This report has no regard for the specific investment objectives, financial situation, or needs of any particular recipient. 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 certain 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. Income from municipals 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. The non-rated bonds (NR) should 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, Member FINRA/SIPC.


The DRL Group is not a registered entity or a subsidiary or control affiliate of NewEdge Securities, Inc.


Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.

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 to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that 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.