Broker Check

Market News & Commentary - From The Desk Of David Loesch 06.22.2023

June 21, 2023

  • The updated DOT Plot from the June FOMC meeting shows most participants anticipate one more 50bps move. The markets are not convinced this will happen. As of this writing, market participants believe there is only a 10% chance of an additional rate hike for the balance of this year. I suspect Powell will explain why he did not hike in June.
  • Many firms are cutting back their volume forecasts for 2023 as states and cities refrain from issuing debt. Year-to-date issuance is down 15.6%, and the number of "issues" in the marketplace is down 26% year-over-year due to maturities and calls. This point will continue as we move through the year's balance. Many, including me, expect we will see lower issuance, and while bonds are being called, they are not replaced. The net impact of this should be higher pricing over time.
  • Bond yields should be in this trading range for a while based on Powell’s comments, bond issuance, demand, and steady rate moves by the FED. The trend should be higher prices/lower yields, but rates will take a while to trend that way. With this said long-term investors should consider buying at these levels. Recessionary fears are dissipating, and a soft landing could happen; either way, rates should be steady, and a good entry point for buyers.
  • As previously discussed, states have collected higher tax revenues over the past year. However, Northeast states such as NY, and NJ seem to be starting to "buck" that trend. NJ collected $2.6B of tax revenue in May, $642MM lower, or a 20% decrease, from the same month a year ago. This change is one of the most significant decreases in tax collections of any state, and many contribute this to residents moving away from these high-tax states.
  • Overall, we continue to focus on solid revenue states such as TX and CO, to name a few. High-grade paper is attractive, as we feel yields will move down over time; with this said, anything over 4.25% and highly rated should be considered if it meets your criteria.
  • Visible supply will begin this week at $9.9B, slightly above the average of $8.8B. This change is insignificant, considering the average was $11.5B last year. The visible supply should stay around $8-9B during the summer as issuances typically slow down. Our market should continue to stabilize as we move through the summer. As we move down in Visible supply, we expect it to help pricing while pushing yields slightly lower.
  • Yields should continue to be steady or dip slightly as we continue to watch the stability in FED speak. I would not be surprised if we saw an increase in rates in July or August, then the final pause from the FED. Should we see an increase, we think that will be "it" for hikes. The FED continues to give us "mixed messages" based on the comments “post” meeting - call us for additional details and how it impacts your bonds.
  • Based on the above comment, US short-term inflation expectations fell in early June to more than a 2-year low which helped drive consumer sentiment higher. Americans indicated they expect prices to climb at an annual rate of 3% over the next year, down from 4.2%. The target rate is 2%, which will be difficult to achieve anytime soon. What happens if it does not get there; that theory is ripe for discussion
  • US homebuilder sentiment advanced again in June to an 11-month high as a limited number of homes are on the market. The gauge rose five points, the sixth consecutive month, this data point rose. Overall, home building is robust, particularly in the Midwest and South, and many, including me, expect this trend to continue.


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.

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David Loesch

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)


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