- 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
605-B Park Grove
Katy, TX 77450
866.664.4040 (toll-free)
281.398.8600 (direct)
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.
Bonds could also be subject to the De Minimis Rule; please consult your tax advisor for further clarification.
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