Broker Check

Market News & Commentary - From The Desk Of David Loesch 10.12.2023

October 11, 2023
  • UBS Group is announcing its departure from the negotiated underwriting business. Previously ranked 19th in this sector, the firm worked on 15 deals in 2023, amounting to $1.8 billion. This year, 73 firms have engaged in at least one negotiated transaction, but nearly half have managed fewer than ten. We will see more news around this area. It has been a challenging two years for underwriting departments.
  • In 2023, the US has already experienced a record 24 disasters, each causing over $1 billion in damages, and with over two months left in the year, this number is expected to rise. Assessing the costs of Hurricane Hillary, recent hailstorms in Texas, and flooding in New York is still underway. A report by the National Centers for Environmental Information revealed that in the first nine months of the year, storms, drought, and wildfire resulted in the deaths of 373 people and caused $67.1 billion in damages. Texas, Louisiana, Mississippi, and Florida recorded their highest temperatures for the January-to-September period, while the contiguous US experienced its 10th warmest. We will start to see new issues emerge to deal with the consequences of those disasters, particularly the NY flood and Texas energy problems.
  • Numerous deals are scheduled on the calendar, indicating that bonds must be offered at attractive prices to entice buyers. In the language of experienced investors, bonds should be "priced to sell." It is anticipated that upcoming municipal bond offerings will be set at "distressed levels" to ensure they are sold. There are a lot of deals on the calendar, and with such a strong supply in this market, we will continue to see volatility throughout the year.
  • Primary market: Visible supply begins the week at $11.3 billion, above its 2023 average of $9.1 billion. The biggest sale expected is $248.6 million in Houston TX GOs.
  • NY MTAs could potentially encounter a $594 million deficit in its operating budget by 2027 if it fails to implement the required cost-cutting measures to align expenses with revenue collections.
  • Mortgage rates rose for a fourth week, reaching the highest since December 2000. The average for a 30-year fixed loan was 7.49%, up from 7.31% last week, Freddie Mac said in a statement Thursday. Borrowing costs have topped 7% since mid-August, a streak that helped send applications for home-purchase loans to a 28-year low.
  • Michael Hartnett, from Bank of America, anticipates that bonds that have experienced a decline in value will see a resurgence in 2024 as rising interest rates lead to a recession. He expects them to be the top-performing asset class in the first half of that year. Despite the recent decrease in bond performance, investors remain undeterred. We just have to make it through this season, and we should be on the upside pretty soon.

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

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

 

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