Broker Check

Market News & Commentary - From The Desk Of David Loesch 10.07.2021

October 07, 2021
  • The riskiest MUNI issuers, including charter schools, student housing, and jails, are pulling back on borrowing as many underwriters and buyers will not or do not want to buy that debt in our markets. YTD issuance for this sector is about $80B and is on track to finish the year below the $126B underwritten last year.  I suspect the slower pace will continue to fall due to investors not wanting to buy either illiquid assets or assets with "credit risk" associated with them. 
  • The pandemic has forced the issuance of risker-type assets (as mentioned above) into the private sector in the form of private equity or taxable securities. If we have any rate moves, I expect this type of debt to do poorly.
  • The State of Florida indicated they would temporally forego $2.30B of FED Education aid because the state has failed to submit a plan to spend the capital. The state said they do not need the money from our government and would not take the $7B emergency relief funds they cannot or might not use. FL missed the June deadline for submitting a plan. I believe we will continue to see this type of behavior for many other states as we move through 2022.  Overall, this is good for the MUNI bond market, and I suspect this will not impact any credit ratings for the state.
  • Democrats and Republicans must decide how far to take their deadlock over the US debt limit, which is pushing the country close to a default. I suspect we will see a compromise at the last hour, thus creating another round of sell-offs in equity and FI markets.
  • From a flow side of the markets, MUNI traders reported a pick-up of flow in the secondary markets for September. Over $54B of bonds changed hands last week, the most since March and the second largest weekly total of the year.  I suspect this will continue as we see the new issue markets pick up over the next 60 days.
  • MUNI bonds continue to do well from a credit quality standpoint. In NY, for example, real estate taxes from deals have surpassed the pre-pandemic levels as surging demand for residential properties bolstered NYC's coffers. NY tax revenue from real estate transactions almost doubled in the first two months of the fiscal year, $468MM, 18% higher than expected.   As discussed, these revenue increases will be prevalent in many municipalities across the US and should lead to upgrades.
  • Even during a typical year, October tends to be a weak month for MUNI's because the pace of underwritings tends to tick higher before the holiday winter slowdown. With the added risks of the FED, I expect pricing to be under pressure. 
  • The September FOMC meeting suggested the FED is all but certain to announce its taper plan in November. The condition for tapering still has not been met by "substantial growth" in the labor market; however, many believe this will happen in November.  The bar for derailing this would be next week's jobs report. If that is a massive disappointment (losing less than 240K jobs created), this might halt any FED moves.  Claims data over the next week will most likely show more people coming off unemployment insurance, but it will take several more months to reabsorb these people into the labor markets.  Overall, many think tapering will happen in November, if not by year-end.  The markets are ready for this and should absorb the news well.
  • Biden and Democrats will regroup this week to salvage two pillars of his plan after the gridlock scuttled the passage of the infrastructure bill. Pelosi reset the clock on Saturday, giving the lawmakers until 10/31 to pass the $550B infrastructure bill; as with the other bills which deal with infrastructure, many on the street believe this will pass.


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.