Broker Check

Market News & Commentary - From The Desk Of David Loesch 08.05.2021

August 05, 2021
  • Many have asked what CA and TX would receive once the $550B deal passes through Congress. Both states are in line for more than $25B each to rebuild their highways while improving water infrastructure. Texas will use funds to enhance the power grid recognizing that this is necessary due to the February freeze.
  • There continues to be leadership troubles at MTA as Gov. Cuomo faces mounting calls for his resignation. The MTA has been waiting for state lawmakers to approve Cuomo's leadership plan for the system; however, he has been dealing with "more pressing matters" related to his governorship.  This issue should not impact the credit; however, the MTA has been under temporary leadership for over a year.  Overall the MTA credit has done very well through the pandemic. We have been and continue to be buyers of this credit through this challenging transition. 
  • Colleges are preparing for a flood of students returning to on-campus learning and dorm life. Many have indicated they do not have enough housing for all the students coming back to class.  Several colleges have shifted to longer-term housing during to service debt. This change is creating an issue for many students at both big and smaller universities. 
  • Investors are banking on another four years for Powel to remain the FED Chair.  I believe he is the right choice for the job, and I think the financial markets believe this too.  Powell has many things going for him; however, one crucial factor is the large consensus around him who believe in the current monetary policy. I think the FED is heading toward its first tightening under a new policy framework starting with tapering at the end of this year. The FED has indicated they are studying the labor market more so than ever. Powell said last week that the new monetary policy would be "tested" when it comes time to raise rates.  We believe rates will remain the same through 2022 and perhaps have a move 1st Q 2023.
  • I suspect we will see tapering at the EOY 2021 focusing on Mortgaged back securities. Many believe this will not impact our markets as the housing market is "hot" and should cool down in 2022.  This issue should not affect High-Grade MUNI's. 
  • Senator Chuck Schumer indicated that the $550B infrastructure plan might not pass this week because a key Republican tested positive for COVID and would quarantine for ten days. This deal will get done; however, it will be delayed based on this issue. DRL believes this will get done, and this will be a positive for the MUNI markets.
  • Nuveen said that the rally in high-yield debt might not continue at the same pace as the past year. They indicated the demand for MUNI debt continues to outpace supply and will likely continue through the year. Nuveen also suggested they do not see rates changing this year or next, and they expect a very dovish approach to all rate adjustments from the FED.
  • IL paper continues to rally based on increased tax rates and collections. The DRL Group has been buyers of this credit for quite some time. IL is open for business like many other locations. However, with the Delta Variant gaining steam, there are concerns about new mask mandates.
  • Oyster Bay NY had its bond rating raised three levels by S&P because of its improved finances, substantial tax increases, and cost cuts. S&P indicated they are looking at other towns across the United States that could receive these upgrades over the next six months.  I suspect we will see many as overall budgets improve. 


David Loesch


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