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Market News & Commentary - From The Desk Of David Loesch 06.03.2021

Market News & Commentary - From The Desk Of David Loesch 06.03.2021

June 03, 2021
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  • The White House is in the process of drawing up an ambitious plan on how to spend the $3560B in FED aid they are receiving under the American Rescue Pan.  The White House feels that the most urgent use of funds is to provide relief to people and businesses that have been impacted by COVID and getting additional funds out to the unemployed.  Under the plan states and cities will be able to invest in underfunded projects such as water, infrastructure, and broadband services.  Some states, such as CA, have also investigated providing recurring cash payments for low-income residents. This infusion of cash will most defiantly help the MUNI markets; however, it will be interesting to see how the states “spend” these funds.   We continue to be buyers of high-grade MUNIs based on numerous factors, this being one of them.
  • TX State Sales Tax collections totaled $3.4B in May; a record high monthly total and 30% more than May 2020 (COVID so not a good comparison in my opinion).  Consumer spending drove pricing and sales taxes up; this will be a common theme as we move into the recovery phase. 
  • This Friday will is the Jobs Report which will be looked upon as an important data key.  As we move through the recovery, jobs in the service and hospitality sector will be important to add.  The 10-year Treasury and equity markets are currently flat while inflation remains the focus. The Core Personal Consumption Expenditures Index is also a key inflation gauge.  I expect the inflation numbers to continue to be firm which will put a strain on overall markets, however, I do not foresee these numbers impacting our markets to the point of price erosion.
  • Charter Schools are selling muni debt at a record pace; they have sold more than $1.28 billion of bonds year to date, ahead of the $821 million sold by this time last year. Charter Schools represent one of the riskier bonds in the $3.9 trillion muni world.
  • The Biden Administration is proposing to create as much as $50 billion of federally subsidized school infrastructure bonds. The government would cover 100% of the interest cost. This proposal would be effective in 2022
  • Illinois passed a $42.2 billion budget for 20222, starting in July. The state will also pay back the outstanding $2billion it borrowed last year from the Federal Reserve's Municipal Liquidity Facility to save as much as $100 million in interest. We have been buying IL paper for quite some time now and agree with this assessment.

 

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

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