- As we have mentioned in previous notes, we do not expect a rate cut this month by the FED. Beyond eliminating bets or a FED cut this month, traders are also wavering on the prospect of a reduction in September. In the weeks leading up to the payroll data, which was released today, July 3, a .25 cut was fully priced in. With the numbers today coming in stronger than expected, that might be “less of a done deal” at this time.
- Looking at the numbers today, July 3, it appears the overall labor force shrank in June, and the number of job seekers decreased by more than 200K. Employment increased by 93K, so the bigger reason for the drop in the unemployment rate came from people leaving the labor market, which is typically not a good sign.
- We have been discussing school districts for some time, particularly in relation to the funding cuts we are experiencing under the current administration. A NJ School district is planning to file for bankruptcy after years of state funding cuts, escalating a showdown with the Governor. We continue to remind buyers that when purchasing education paper, be aware of the underlying credit quality and the insurance company (if applicable) that insures the bonds.
- Zohran Mandani became the Democratic candidate for NYC on Tuesday, bolstered by a coalition of younger and middle-class voters. This victory was achieved through a new network of voters in a city that has historically tended to vote more along ethnocultural lines than income or class lines in primaries. The 33-year-old democratic candidate campaigned on a message of affordability, and it was the renters and the city’s middle class who were turning out to support him. We will be closely watching this election, as it could impact the city’s credit rating based on the campaign promises made by Mr. Mandani.
- The US House of Representatives is on track to pass President Trump’s tax and spending bill Thursday, allowing lawmakers to meet the president’s self-imposed July 4 deadline after negotiating all night long. This bill should not impact the MUNI markets; if anything, we suspect it will hold demand steady, with a slight increase over the balance of the year.
- President Trump indicated he is not considering delaying his July 9 deadline for higher tariffs to resume and renewed his threat to cut off talks and impose duty rates on several nations, including Japan. As we have discussed, this is one of the primary reasons why the Fed continues to keep rates steady.
- Mortgage applications were released on July 2, and with rates hitting their lowest point since April, this helped boost a pickup in home refinancing applications. Home listings are rising in many areas, helping to slow the growth of property prices. However, a further decline in borrowing costs would provide a much-needed tailwind for the struggling housing markets. This is something the Fed will likely consider at the July meeting and discuss; however, we remain firm that there will be no cut this month.
- Harvard talks with the White House have stalled, threatening a swift resolution to a standoff that affects the school’s finances and upends plans for foreign students. This is a credit issue that should be monitored, regardless of whether you own debt associated with the university or not. We continue to monitor this issue, as it could potentially impact other higher education debts.
- BlackRock sees an opportunity for investors to boost their allocations to state and local government debt this summer, as strong seasonal factors could drive pricing higher. The asset manager expects a limited supply of new local debt sales in July and August, and, as we have reported, we foresee the same with a light calendar over the next several weeks.
- Bostic indicated that tariff price increases may be incremental, rather than a “one-time bump,” which could result in more persistent upward pressure on inflation. “There is a risk that seeps into the psyche of the consumer and the business leader,” Bostic said Monday, June 30, during an event in London.
- Bessent indicated that it would not make sense for the government to ramp up sales of longer-term securities, given the current yields. This is the first time I have heard a FED chair indicate rates are “too high” to issue debt. We have been hearing this from the current administration, but unless we have missed it, not from the FED. We have listened to lots about tariffs and inflation; this type of remark is explicitly targeted to “why would we issue debt” at these levels?
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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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