- Muni supply will continue to dwindle over the next few weeks, which could deliver a bounce to our markets due to the lack of paper. This decrease will be the lowest in supply since February this year. The visible supply for the next 30 days will average $5.9B, which will prove to be one of the slowest paces for the year; last year’s average was $11B. We view this as an issue that could push rates down over the next couple of months.
- Oregon’s 3rd largest city is about to lose its only hospital, illustrating the fallout from what we have seen from COVID and poor management in that sector. The operator, Peace Health, indicated it will shut its doors due to a lack of operating profit. Sadly, this hospital served primary college students, and it will leave them without an emergency room in town. This situation is another example of "healthcare" paper continuing to falter over time, and we choose not to trade the NON-insured paper of this structure.
- T bills seem to be "stuck" here in a bearish move in a bullish world. I suspect we will continue to see these levels for a while, at least through the middle of September. Fund flows are steady despite the bond rout, which will continue through the balance of this year. The “bull case” obviously is that yields are higher than they have been in a very long time.
- The “bear case” for T bills? The 10T bill has surged 111 BPS from its low in 2023 of 3.25% in early April to last week's high. I suspect this will be somewhat of a high right here, as a stunning economic surge in the US is not likely, jobs are slowing, savings are low, and so on. As mentioned on our recent webinars, we see the 10T trading around the 3.85%-4.20% range, and we know that is widespread. MUNIs always lag markets; yields seem to be "trying" to go lower.
- Powell indicated last week that the FED is prepared to raise rates further, if needed, to combat inflation. Powell was set on the 2% target rate while exhibiting that the current inflation levels are "too high."I suspect we will start to see numbers come down, which should help, but we will need to see numbers "stay down" for it to take effect. As many have said, and almost a cliché now, the FED is "data dependent"; they will rely on the "current data" to decide.
- Former T Secretary Lawrence Summers said the FED would need to raise rates at least once more and cautioned that insufficient attention is being paid to the effects of the US fiscal deficits. Summers indicated there is "not much slowing" in the pipeline at this point, and this should be nothing new as we have all discussed one more hike.
- As we know, visible supply remains low and finishes the week at $5.1B, well below the average of $ 9.1 B for the year. This trend will continue as we move into the 4th Q, and I suspect it will help pricing. Bottom line - low supply, good credits - we are buying 4.50%+ insured.
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.
David Loesch
dloesch@drlgroup.net
605-B Park Grove
Katy, TX 77450
866.664.4040 (toll-free)
281.398.8600 (direct)
This report has no regard for the specific investment objectives, financial situation, or needs of any particular recipient. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Income from municipals may be subject to state and local taxes and the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility as to principal if the security is not held to maturity. Non-rated bonds (NR) should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.
Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer, Member FINRA/SIPC.
The DRL Group is not a registered entity or a subsidiary or control affiliate of NewEdge Securities, Inc.
Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company. Bonds could also be subject to the De Minimis Rule, please consult with your tax advisor for further clarification.
Reminder: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not e-mail orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.