Broker Check

Market News & Commentary - From the Desk of David Loesch 05.30.2024

May 30, 2024
  • If you recall, Goldman made the call there would be no cuts this year.  Late last week, they said the FED would only start to cut rates in September if we saw significant economic data showing that the economy was slowing down.  This is a pivot from two weeks ago when Goldman was “adamant” that the FED would not cut rates in 2024.  We continue to see cuts at the end of this year (December, most likely)
  • Another day, another FED member spoke about the economy.  Raphael Bostic (Atlanta FED President) indicated he is hopeful that the explosive pricing pressures seen during COVID will normalize over the next year.  He also suggested, “We have a way to go,” perhaps the 4th Q of this year will be the time to reduce rates.  This is one of the few times I have seen a FED president other than Powell speak to a time frame to move rates down.   Again, higher for longer.
  • With equities continuing to decline as T yields grind higher, the bond market is clearly driving equities right now.  With the 10T hovering around 4.60% (+15 in two days), equities (global) are headed for their worst week since mid-April.  Overall, this should be expected, as yields hold highs and futures are down again.
  • Despite the run-up in yields, investors added 573MM to MUNI bond funds in the week ended 5/22.  I suspect this is an indication of yield buyers seeking higher yields due to the market run-up over the past week to 10 days.  I suspect this will continue to have positive momentum should yields hold here or even move up.  MUNI buyers work on locking in these types of yields to boost the overall account return from a cash flow POV.
  • From a state point of view, IL has been gaining momentum over the past several years, and we have been very vocal about this with our clients.  IL is closing the gap with its peers in the MUNI bond world as investors herald the passing of an on-time budget and broad improvements in the state’s fiscal standing.  The extra yield investors demanded about two years ago has narrowed to the lowest levels last week as lawmakers approved a $53B budget for the year starting July 1.  There was a time when IL could not pass their budgets, and weeks, if not months, went by without any accomplishment. 

The bottom line is that yields have been up +20 bps over the last three days while T bills have been driving the market. I suspect we will be here for a while as supply continues to be heavy until the second week of June. If you are seeking to buy for the long haul, we think rates move down over time, and this could be a good entry point. The next FOMC meeting will be 6/12, followed by 7/31. No cuts (or hikes) are expected at this time. 

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)

 

 

 

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.

Prices and availability may change without notice at any time. The securities described herein may not be eligible for sale in all jurisdictions or to specific categories of investors.

This summary is for informational purposes only and is not an offer or solicitation to purchase, sell, recommend, or endorse any security or issuer. New Edge Securities, Inc. and DRL Group do not represent this information's accuracy, completeness, or timeliness.

This report does not regard any recipient’s specific investment objectives, financial situation, or needs and is based on information obtained from sources believed to be reliable. No independent verification has been made, nor is its accuracy or completeness guaranteed. 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. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio.

Reminder: E-mails sent through the Internet are not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PINs, passwords, or other important information. Do not e-mail orders with time-sensitive instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private; 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.

 

Call us today at 281-398-8600 to invest in these or any of our other offerings.