Broker Check

Market News & Commentary - From The Desk Of David Loesch 08.12.2021

August 12, 2021
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  • The Senate passed the$ 550B infrastructure plan representing the most significant burst of spending on public works in decades. This legislation will now go to the House, where its fate is in the hands of the Democratic caucus.  If the infrastructure bill clears both chambers, every state will feel the impact. This bill will include monies for the following areas:

          $110 billion in new spending for roads and bridges

          $73 billion for electric grid upgrades

          $66 billion for rail and Amtrak

          $65 billion for broadband expansion

          $55 billion for clean drinking water

          $39 billion for transit

  • This bill will be a massive boost of cash for all municipalities. I expect rating agencies to upgrade many municipalities starting with the larger ones such as MTA.  It is clear at   this time MUNI’s will be the main security beneficiary from this bill both from a “cash” infusion and FED Income tax increases.
  • In addition, credit rating downgrades are becoming rarer in the $4T MUNI market.  S&P released a report on Tuesday saying that it had completed 80 public finance downgrades which is the lowest quarterly total since 2009. At the same time, upgrades outnumbered downgrades for the first time since the 1st quarter of 2020.  I suspect this trend will continue through the balance of this year and next, making MUNI's a much more attractive asset to own in portfolios.
  • US consumer expectations for inflation rose to an eight-year high over the medium term. The survey reflected an anticipated inflation rate of 3.70% in three years, the highest since August of 2013.  I believe we will see inflation; however, it will be muted as we move into 2023 and what we are seeing today is not sustainable.  The FED has been very clear, they expect inflation numbers to subside over the next year.
  • Visible supply has climbed to $12.3B, up from the average of $10.8B this year. I believe this fact is an anomaly and will move back down as the overall supply tightens due to the infrastructure bill continuing to put pressure on our markets from a pricing standpoint.
  • Barclays indicated on Friday; their data shows an earlier than expected recovery for major airports. The DRL Group has always been buyers of these airports through the pandemic. I suspect the rating services will upgrade them over the next several months in select locations.
  • Benchmark State 10-year yields:  CA .91, FL .91, IL 1.46, NYU .83, PA 1.05, TX .94 all down ~3bps from the last report.

 

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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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