Broker Check

Market News & Commentary - From the Desk of David Loesch 05.23.2024

May 23, 2024
  • Investors added 465MM to MUNI bond mutual funds in the week ended May 15. This indicates prospects/clients are buying paper and cannot find the paper they are seeking from their current broker. The bottom line is that buyers are out there, and they are not finding individual bonds, which fits into our day-to-day business model. 
  • The US housing market continues to face challenges, with home sales unexpectedly declining for a second consecutive month in April. This trend is likely a result of the 'record high' borrowing costs that buyers are currently grappling with. The implications of this could align with the FOMC's desire for the economy to slow down, as high borrowing costs could deter potential buyers. 
  • Goldman indicated yesterday they expect the FED will not cut rates this year amid an economy that has proved more resilient thanks to government spending. Goldman indicated they do not see a "compelling reason" for the FED to cut rates and are currently indicating they will hold rates steady for the balance of this year. I continue to believe that they will cut once, and most likely, it will be after the election. 
  • The city officials of Chicago indicated they remain unsatisfied with the rating agency's assessments of the city's credit ratings yesterday. DRL has been a buyer of the insured paper of this city for quite some time; due to the BOE's issue dealing with their retirement system, we have not thought the City as a whole is in jeopardy of Bankruptcy. Furthermore, IL paper has performed well over the past few years but has traded cheaply due to "guilt by association" with the City of Chicago. The bottom line is that the credit ratings are most likely current. However, there is value in the paper if you are seeking higher returns. 
  • An article was pushed out Monday indicating the FED will need to do more to address issues that keep US banks from tapping a key emergency lending factify. This was the message of current and former central bankers and experts who delivered some observations aimed at the FED's efforts to revamp the backstop program. Bankers, in my opinion, are becoming increasingly concerned about the amount of debt in our country, both by the Fed and individuals. As mentioned before, CC debt has been at an all-time high for many years, and savings have been at a low. I suspect this type of chatter will continue as we move through the balance of this year and into the next. 

Bottom line - rates are up ~+12 bps over the past couple of weeks due to supply concerns and overall inflation fears. With rates up again today (May 23), we could see another +5 bps move as we move through the day. Yields are attractive here but could go slightly higher. If you are a long-term buyer, it would be prudent to put capital into work here.



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)



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 principal and interest payment 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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