- The devastating fires in Maui could result in losses from $4B to $6B. Moody's indicated they will review all credit ratings on the island while making specific changes as needed. We will continue to monitor this situation; although this paper trades "few and far between," it will impact HI paper.
- Cook County IL GO credit rating has been raised one notch to A1 by Moody’s. Based on its strong operating numbers, they have also revised its outlook to stable from positive. As we have indicated to clients and prospects, IL has been a buy for several years and should continue to do well.
- July US data was surprisingly strong, suggesting the reason for optimism on 3rd Q GDP. The new GDP estimate points to 2.20% growth Q on Q; however, it is still down Y over Y from 2.40%. This point is crucial as we await Fed Chairman Powell's comments this week. It is expected that Powell will hint at another rate hike. However, as mentioned, with T bills bouncing in yield over the last 2.5 weeks, it will be interesting to see how he responds. Data points to growth in the Q; more cautious scenarios like the consensus forecast might lean more towards the dovish side of the coin. Yields have "popped" over the past two weeks, as paper is 25bps higher. We are buying 4.65% YTW on insured paper with call protection.
- The US T markets and most of the fixed income sold off again this week, driving the 10-year T to a 16-year high. This point directly results from a resilient economy, and investors are positioning for further hikes in the rate cycle. We are currently in a "policy-sensitive" time, weighing on the FI and equity markets. On the plus side, yields are higher on all FI assets across the board, and investors are taking advantage of this. These yield changes will likely be short-lived, most likely through Sept.
- Banks worldwide have sold $2 trillion of bonds in record time this year as EU leaders raised money to repay cheap central bank loans. If the market remains cheap, the banks will have a ton of cash to put back into the T and MUNI markets. Creditworthiness is solid, and banks know this, particularly in our markets. At some point soon, you will see banks start to move into our markets.
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.
We would love the opportunity to visit with you further. Please click here to schedule a call with one of our specialists or contact us at 281-398-8600.
605-B Park Grove
Katy, TX 77450
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