Broker Check

Market News & Commentary - From the Desk of David Loesch 04.11.2024

April 11, 2024

The Road to Rate Cuts Just Got a Little Bumpier

The release of the CPI report, a crucial indicator of inflation, has significantly impacted the market's expectations for rate cuts. The report revealed that March's Consumer Price Index (CPI) figures rose 3.5%, a clear signal that the Federal Reserve (Fed) will not be hastening any rate cuts.

The market's response to the CPI report was immediate and severe. The 10-year Treasury reached a high of 4.56%, and the stock market experienced a significant sell-off, losing over 450 points. This reaction clearly indicates that the market is adjusting its expectations for rate cuts.

The CPI report affirms there will be no smooth sailing to reaching the Fed's inflation target of 2% and that “higher for longer” interest rates are the most plausible outcome. Furthermore, minutes from the Federal Reserve Committee's March Meeting indicate that most policymakers favor driving at a slower pace. The CPI figures and last week’s job report have complicated the rate-cutting timing. The meeting notes reflected that the Fed is still biased toward cutting but will be watchful.

While the market digests these latest inflation figures, the focus will now shift to the strength of corporate earnings, at least until the subsequent figures are announced.

The Bottom Line for MUNIs is that yields will remain elevated for the next Qtr. We are still determining when any cut will be. The FED will not want to get this wrong; therefore, they might have to wait “too long” to cut it. If you are a long-term buyer and seeking ~4.40% Tax Exempt Returns, this is an excellent time to enter; if you are worried about the volatility, sit on the sidelines. Both strategies are risky, depending on your objectives. We are buying here opportunistically while staying either <4 years or 15-19 years, not buying in the belly of the curve. If you are concerned about what you own, call us; we can walk you through your portfolio with clarity while providing a little optimism. 

Thank you for taking the time to read.

More Market Insights

  • Historically, March is a month where seasonal patterns are favorable for disinflation. Yesterday, March's core CPI came in the same as February's; even if it maps to a lower core PCE inflation reading, this is not a good development in the fight against inflation. Many economists think the FED will strongly signal that the disinflation momentum is slowing, but those expecting a rate cut in July will have to wait. The bottom line is that these numbers were not favorable for any rate cut anytime soon, and now some are thinking of one cut this year; again, the FED cannot get this wrong.

  • Yesterday, we saw a slump in bonds (all paper, both domestic and global) again as traders reduced their wagers on rate cuts. MUNIs slid +6 on the long end, and T Bills continued to increase in yield. For those waiting for higher yields, we are here.

  • If you are a buyer of California paper, the yield premium for CA bonds has jumped, just as the most populous US state readies to borrow $1.5B while staring down a significant budget deficit. Some investors will only buy CA names. As a friendly reminder, we trade CA paper daily. 

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

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)


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