Broker Check
04.29.2021

04.29.2021

April 29, 2021
  • Last night 4/28, President Biden took a risky move while calling on some Americans to pay higher taxes to fund the $1.8T deal he proposed. He promised sweeping changes following the pandemic, indicating this will be a "once in a lifetime investment" in our American families.  Trillions will be allocated for spending on infrastructure, childcare, paid leave, community college tuition, and subsidies for working-class families.  Biden was very clear, American top wage earners should and will foot the bill.  I suspect this will have lasting effects on MUNI's and how they will perform over the next several months.
  • As we expected, the FED said they would not let up on monetary policy despite an economy in acceleration.  The Central Bank indicated it would keep rates at near-zero and buy at least $120B bonds per month for the foreseeable future.  The FED also indicated that the economic strength and inflation we see are temporary due to a "pick-up in demand" post-COVID. I suspect this will be the policy for quite some time.  Powell indicated in his closing remarks that the economic recovery is uneven and far from complete.  He sees these one-time price increases will only likely have transitory effects on inflation.
  • US college enrollment dropped to the lowest level in almost two decades last year as the pandemic shut down schools and persuaded students to put their academic plans on hold.  About 2MM of the 3.1MM high school graduates who signed up for college have found themselves stuck at home after graduation. This situation will impact the MUNI markets for lower-tiered regional colleges with small endowments. 
  • Home prices are soaring, the most in 15 years. With low mortgage rates (historic lows) and a minimal inventory on the market, property values across the board have moved up 12% on average across the country.  I suspect this will continue to perform over the next several months; with inventory low and the lead time to build, you can expect pricing to stay firm.
  • AAA callable yields:  1 year .04, 2yr .06, 5yr .37, 10yr .91, 20yr 1.35, and 30yr 1.56.  As indicated, I would expect this market to continue to trade in this range. With a huge amount of bonds coming due over the summer, the amount of capital will outstrip the supply of paper.
  • The FOMC indicated it would maintain a steady trajectory at the April meeting. The FED will continue to remain firmly committed to the policy glide path they have set since 2020.  As we know, at the March meeting, policymakers signaled a willingness to tolerate a moderate rebound in rates as evidence of more optimistic sentiment from the market.  Since that meeting, the 10T drifted lower ~10bps. The 1.50%-1.75% range will be the number for the near future. 

  

 

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

281.398.8607 fax

This report has no regard to the specific investment objectives, financial situation, or needs of any particular recipient. Based on information obtained from sources, this report is 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 construed as a solicitation or an offer to buy or sell securities or related financial instruments. Opinions expressed herein are subject to change without notice and the division, group, subsidiary, or affiliate of MACC., which 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 investors' specific categories. MACC 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 as well as 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 (NR) bonds should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.

Securities are offered through Mid Atlantic Capital Corporation (MACC), a registered Broker-Dealer, Member FINRA/SIPC.

The DRL Group. is not a registered entity or a subsidiary or control affiliate of MACC.

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: Email sent through the Internet is not secure. Please do not use email to send us confidential information such as credit card numbers, change of address, PINs, passwords, or other important information. Do not email orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This email is not an official trade confirmation for transactions executed for your account. Your email message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this email, nothing in this message should be construed as a digital or electronic signature.

 

Gallery