- As we know, the FED held rates steady on 7/30, Powell said interest rates are in the right place to manage continued uncertainty around tariffs and inflation tampering expectations for a rate cut in September. Powell indicated, “There are many uncertainties to resolve.” Powell also stated that it does not feel like we are very close to the end of any resolution regarding tariffs and inflation. MUNI yields continue to be elevated, and we are buyers here based on pricing. Predicting “when rates will come down” is something we cannot do, however the thoughts are that rates will come down at one point. Yields should follow.
- US Treasuries declined as the FED, as mentioned, dimmed expectations for a rate cut in September, urging “patience” in the face of a strong labor market, and the current CPI number is higher than the “target” number. This has prompted traders to cut back bets on a more “forceful” FED action in the months ahead.
- Bessent indicated the Treasury will focus more on the shortest-dated securities to fund the gaping federal deficit at least until 2026. Bessent indicated they would boost sales on shorter debt and anticipates keeping the size of its note and bond auctions unchanged for the next few quarters.
- MTA has approved the CT request for a combined 10% fare hike on a portion of the Metro North Railroad that runs through the state. The increase will start on 9/1, then again on 7/1/26, with a 5% raise on each occasion. This will likely not impact the bonds’ credit rating, but every bit of extra revenue will help.
- Investors added $ 931MM to MUNI bond funds in the week ended 7/23, indicating that MUNI buyers are buying at these levels and should continue through the balance of the summer. I suspect that with the elevated yields and the tariff talks seeming to come to a head, you will see investors buy high-grade MUNI paper at these prices.
- We reported on the NYC congestion toll when it was announced; as of this month, it has generated $ 334.9MM in the first six months. These funds will go to MTA and be used to finance upgrades on the system. We know that no one likes to pay “additional fees”; however, in this case, this is a net positive for the transit authority, which should help the overall program. The FED meeting today should shed light on markets, specifically how aggressively the FED will lower rates in the coming months. We suspect there will be no cuts this month and will likely stick with one or two (probably two) for the rest of the year.
- The US housing market continues to struggle, logging its slowest spring season in more than 12 years. Many buyers are concerned about AI taking jobs and just how tariffs will impact their monthly expenditures.
- US and Chinese officials are meeting this week, starting Monday, July 28, to extend their tariff discussions. This is the third meeting in less than three months between the Chinese Vice Premier and Bessent. The discussion this week will be how long the current tariff truce can be extended, as well as US levies tied to fentanyl trafficking.
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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.
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