- As we saw on May 21, long-term borrowing costs for all major economies are surging as investors question the government’s ability to cover massive budget deficits. The 30-year bond yields in the US and Japan reached multi-year highs. This is a direct result of investors warning that governments cannot continue to borrow at the current pace, especially with the trade tensions and perhaps the sticky inflation our FOMC committee continues to reiterate.
- I have attached a graph of bond yields for Germany, the US, the UK, and Japan. This puts into perspective how much the long end (really across the curve) has moved just in the last few weeks. It will be interesting to learn how policymakers adjust monetary policy to offset this issue.
- We have been reporting on MTA (Metropolitan Transit Authority NY/NJ) for some time. Currently, transportation projects in Manhattan may be at risk of losing federal approval or funds after NY Governor Kathy Hochul rejected the US request to end congested pricing. This is an important factor for ongoing projects and improvements and worth watching closely should you own MTA paper.
- Investors are adding capital to the MUNI markets, as they added 1.09B in the week ended May 14. The prior week saw a 787MM inflow. This is a prime example of buyers recognizing higher yields and taking advantage of the buy side.
- Jobless claims decreased this week by 2000, which is in line with forecasts. This number indicates companies are relatively comfortable with staffing levels despite elevated anxiety about tariffs and the ripple effects of the Trump Administration’s actions to shrink the FED Government. Overall, this should not move the markets. Right now, everyone continues to remain fixated on the tariffs and tax bill being pushed through the House.
- House lawmakers debated the tax bill through the night as they raced to meet a self-imposed deadline to approve the legislation by May 22. Speaker Mike Johnson indicated, “We are almost there on everything,” as he is trying to push the bill out of the House this week. This should not impact MUNIs or Corps to the point of price movement, and it is good news that the MUNI exemption is also safe.
Securities offered through NewEdge Securities, LLC, member FINRA and SIPC. The DRL Group is not a subsidiary or control affiliate of NewEdge Securities, LLC. NewEdge Securities, LLC. has no affiliation to BondDesk Trading LLC or BondTrader Pro, or Tradeweb Direct, Bondpoint, TMC, Market Axess or any ECN.
Yield to call (YTC) is not indicative of 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 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 anytime without notice.
Do not buy 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 claims paying ability of the insurance company.
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.
This document is for informational purposes only and does not replace or serve as a substitute for your official monthly statement generated by NFS. Please refer to your official statement for accurate and comprehensive account details.
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. NewEdge Securities, LLC. 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 with your tax advisor for further clarification.
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