Broker Check
Market News & Commentary - From The Desk Of David Loesch 07.15.2021

Market News & Commentary - From The Desk Of David Loesch 07.15.2021

July 15, 2021
  • Chicago has always been on our radar, and we have been buyers of this credit for quite some time. Chicago has transformed itself into a tech community and has attracted talent to the city in this sector.  The bonds have continued to perform while the city has continued to improve with S&P and Moody's upgrades.  This overall result continues to be a positive for munis. I suspect this will continue with other cities, as we have discussed.
  • The decision by some states to end augmented unemployment benefits ahead of their expiration date nationwide in September creates a natural experiment, will that work or not?  Jobless claims in states that have moved to end benefits early are falling at a more rapid pace than states that have not decided to end those benefits. This trend suggests removing the disincentive to work is indeed speeding the labor market recovery.  I suspect you will see more states take this route. Getting people back to work will help our markets as tax payroll numbers should continue to increase.  
  • Prices surged in June the most since 2008 and topped all forecasts, testing the FED's commitment to sticking with ultra-ease monetary policy. The consumer price index (CPI) jumped .9% in June and 5.40% from the same month last year.  These advances were the largest since 11/1991 - Munis are taking this news in stride, and I suspect we will continue to see strength in our markets as we move into the Fall.  The DRL Group does not believe inflation will spiral out of control.  We believe what we see now is temporary and do not expect any rate moves due to the numbers produced this quarter.
  • Senate Democrats on the Budget Committee agreed to set a $3.5T top-line spending level on the recent package that is being "debated" in Congress.  This number will carry out most of what Biden wants to achieve and make it law without Republican support.  I suspect this deal, like the past few, will get done. Bonds will be issued, and Powell/Yellen will do everything they can to keep our rates as low as possible during the Biden tenure. This strategy will directly impact our markets due to taxes, spending, municipalities credits improving, lack of issuance, everything we have been discussing for the last 12 months.
  • Sales tax revenues continue to increase month over month.  Overall tax revenue increased 40% to $25.2B in May from the same month in 2020.  I realize that May of 2020 is a hard month to compare to, but the economy is moving ahead while the general public is spending their dollars.
  • NJ had its bond rating lifted by Moody's, citing a "bright revenue outlook" with added pension contributions. We saw Moody's put this state on a positive credit watch about two months ago; I suspect you will see further states be lifted by Moody's.  What is surprising, S&P has been very quiet on these matters.
  • If you read the minutes from the June FOMC meeting, officials took this "spike" as a benign view of our economy. I suspect we will continue to see low rates through 2022, and into 2023, we could very well see tapering in 1ST Q 2022.  With adequate notification, this will not impact our markets.
  • Municipal bonds are poised for the best week of performance since November 2020. Bank of America strategists said they are bullish on Muni debt rates through the rest of 2021. They also believe benchmark Muni yields should end where they started the year, with the 10-year yield edging toward 0.71%. This change will be surprising if it does happen; I struggle to believe we will continue to go below 1% at the end of the year.
  • The State Comptroller of TX raised his revenue estimate to $123B for the budget starting in September. He indicated that sales tax collections are "exceptionally strong." The state’s economy continues to return to pre-pandemic patterns. I think we will continue to see this pattern which will help the MUNI markets as a whole. 



David Loesch


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Katy, TX 77450

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