Broker Check

Market News & Commentary - From The Desk Of David Loesch 06.15.2023

June 15, 2023

  • As previously discussed, the hospital sector has been one of the hardest-hit areas in the MUNI markets. Yields on this type of paper have continued to climb based on: wages, lack of workers, insurance issues, and overall patient flow. Unless the system is large and well known, we continue to avoid and possibly sell the lower-rated paper as we move down in yields.
  • Investors continued adding funds to MUNI markets, considering yesterday's "expected" pause. We saw a $484MM in-flow for the week ending June 7 in preparation for the actions by the FED.  
  • The "hawkish pause" is followed by a "dovish hike," indicating mixed signals to our markets and investors. As some said yesterday, this is a confused FED based on the rate moves and the following language. Considering the hawkish pause, Powell made it clear they could raise rates in the future should things heat up. However, referencing the economy and the banking issues, the overall attitude has shifted to "let’s see what happens" from "let's force the issue."
  • Overall, yields were steady after the expected Fed news. We do not think the market will change significantly from here, but I suspect we will see bonds grind higher in price over the next month or two based on the “pause” and language from the FED. 
  • During his press conference yesterday, Powell stuck with a more balanced tone, noting that core inflation has been persistent but is moving in the right direction. He made it clear the FED will maintain data dependence in making these types of decisions (no surprise) and did not express much concern about how the Treasury's securities issuance would impact bank reserves.
  • I suspect we will see one more hike in July, assuming there are no blowups between now and then. Inflation risks and unemployment should diminish the policymaker’s expectations to hike after that—the bottom line is probably one more rate increase. 
  • NY bonds tied to office space will be something to watch as we move through the balance of this year. Property tax increases are necessary to support the amount of debt in some of the districts within the city; early indications are for hiking rates as much as 1.4%. Real estate taxes are the most significant contributor to the NYC coffers, providing about 30% of the $109B budget. As businesses shift outside the city, I suspect vacancies will remain flat or even increase. Several companies are moving outside the city and even the state as the environment continues to be unfavorable. 


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David Loesch

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Katy, TX 77450

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