Broker Check

Market News & Commentary - From The Desk Of David Loesch 09.28.2023

September 27, 2023

  • Americans outside the wealthiest 20% of the country have run out of extra cash and have "less" money on hand than before the pandemic began. All income groups have seen a balance in declines over the past year, and should we see a recession, this will not get any better as we move into 2024. I am starting to put the "recession hat" back on based on overall rates and the Feds' relentless 2% goal for CPI. This point should be good for high-quality paper; however, yields will increase around 5-10bps before they level off.
  • MUNI bonds have not posted losses for two straight years in at least four decades. This might change after the FED.s hawkish pause last Wednesday, which caused yields to soar. This quick change shows how fragile this market is and how "on edge" it is. Yields continue to increase despite nothing new being said at the FED meeting. Overall, I suspect we will continue seeing higher yields as we move into the next few weeks. If you are buying quality and for the long term, this should be a welcome sign to buy more paper.
  • US business was stagnant in early September, driven by a further moderation in demand for service providers. New orders and expectations of future activity tumbled to the worst this year, primarily due to higher overall rates and elevated inflation.
  • What is driving these higher rates? Two FED reserve officials indicated there will be at least one more hike, and these rates will need to stay higher for longer as the US Central Bank wants 2%. Several FED officials are indicating further tightening is "not out of the question," which is a slight deviation from the original thought process. Many, including me, think we will continue seeing rates increase at least once. The concern will be the FED “go too far” and the risk of inflation staying higher than the FED wants. These factors are the primary drivers of the current yield bump and why rates are “trading on their own” right now. 
  • It seems like I write about this each year; we are six days away from another possible government shutdown. It is funny how there are "odds" on everything in the world; in this case, there is a 69% chance of a government shutdown. You wonder if Congress finds "joy" in doing this while flexing its power. Should we have a shutdown, along with the strike in Detroit, we could see the unemployment rate move to 4%. We have been indicating we will need to see unemployment increase; well, here we are.
  • With the rout this week, MUNIs now yield more than they have in years. They continue to be a safe harbor for investors. We have indicated to our clients and prospects the credit quality is in good shape, but we have a pricing issue. Defaults remain low, and investors enjoy tax-exempt returns and an attractive asset class for higher-income earnings.

Bottom line:  We have reported yields are up, and pricing is down. We have seen an aggressive increase in yields over the last week, which has resulted in a +20 bp move. We continue to seek quality; statements will look ugly, but feel comfort knowing your payments are not in jeopardy if you own quality. 


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

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

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New Edge Securities, Inc. has no affiliation with Bond Desk Trading LLC, Bond Trader Pro, Tradeweb Direct, Bondpoint, TMC, or any other ECN. Yield to call (YTC) does not indicate total return; this yield is valid only if the security is called. Bonds may or may not be called or be callable on multiple dates or, in other cases, called on any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at any time without notice. Do not buy discount bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the insurance company's claims-paying ability. Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower-rated bonds carry a greater potential risk of default & should be considered by sophisticated investors only. Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. New Edge Securities, Inc. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule; please consult your tax advisor for further clarification.

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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.

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