Broker Check

Market News & Commentary - From The Desk Of David Loesch 09.23.2021

September 23, 2021
  • BOA and JPM are at odds over BABs (Building America Bonds). BOA indicated that the colossal sum of money that will hit the markets from BABs would cause massive borrowing from municipalities and spur growth in our markets and the labor markets for construction. JPM indicated they do not see increased borrowing because of BABs and think they will have little impact on our markets and job numbers.  This point is an excellent example of how many financial firms have opposing views.  DRL would be a buyer of this credit (BABs) should this get passed and paper is issued.
  • On the BABs issue - one key proposal will pay a part of the interest owed to the bondholders receiving the Obama era program that encouraged spending on public works. About $186B BABs were issued in 2010 and were a huge hit with investors.  Many think this new proposal will spur $1.5T to $5.5T of new taxable debt in 2022-2024, which could account for half of all new debt sales. It is an important topic on both Wall Street and in Washington.
  • As we have discussed before, state revenue collections have been substantial over the past 12 months. CA has collected about $22.9B so far this year, about 18% more than expected.  With these increased collections, many states like CA and NY should see rating upgrades as we move into 2022.  DRL continues to be a buyer of CA, IL, NY, and CT paper based on improvements in credit quality.
  • The labor shortages for unskilled labor are taking center stage for municipalities and the $550B Infrastructure Bill. Trained workers must be ready once local governments get the green light to tap the aid for their infrastructure improvements.  Infrastructure jobs are hard to fill in in most industries across all cities and states.  Road building, water and sewer, and the like are jobs that will need to be filled and addressed; however, few want to do this type of work based on the recent hiring trends.  US job openings rose to a record 10.9MM in July, showing how the economy has had a rapid rebound.  However, the surge in the Delta Variant, unemployment benefits, and early retirements help explain the reluctance to return to the workforce.
  • FED Chairman Powell will face the challenge of convincing investors that the plan to scale back asset purchases is not a runway to rising rates. Officials are expected to hold rates near zero while tapering some of the FED's $120B in monthly buy-back bond purchases.  This plan is difficult to translate, and collaboration with his colleges and the street is critical.  DRL believes we will see tapering by November, focusing on MBS and a small number of T-Bills. 
  • From a broader perspective, the taxable MUNI market has opened up the floodgates for NON-traditional and forging buyers seeking US credit exposure. This fact would explain the significant move tighter in taxable MUNI spreads since the fall of 2020.  Looking back, 2020 offered some compelling reasons why we should be buying taxable MUNIs as the spreads were much broader, and you could pick up yield. Currently, yields are much lower, and the amount of issuance remains low.
  • As we all know, Powell talked yesterday about tapering back; it could be as soon as the next meeting. I think this will create some good volatility for our market since we have been on this standby for a few weeks.
  • Jobless claims rose for a second week, from 350,000 to 351,000, surprising the consensus data.


David Loesch


605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

281.398.8607 fax


This report has no regard to the specific investment objectives, financial situation, or needs of any particular recipient. This report is believed to be reliable based on information obtained from sources, 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 construed as a solicitation or an offer to buy or sell securities or related financial instruments. Opinions expressed herein are subject to change without notice, and the division, group, subsidiary, or affiliate of MACC. 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 investors' specific categories. MACC 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 as well as 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. The non-rated (NR) bonds should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.

Securities are offered through Mid Atlantic Capital Corporation (MACC), a registered Broker-Dealer, Member FINRA/SIPC.

The DRL Group. is not a registered entity or a subsidiary or control affiliate of MACC.

Bonds are subject to market and interest rate risk if sold before maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.

Reminder: Email sent through the Internet is not secure. Please do not use email to send us confidential information such as credit card numbers, change of address, PINs, passwords, or other important information. Do not email orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This email is not an official trade confirmation for transactions executed for your account. Your email message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this email, nothing in this message should be construed as a digital or electronic signature.