- The feud between President Trump and Powell continued yesterday in Davos. Trump indicated Powell would not “enjoy” his tenure if he stayed on the FED Board after his term as chair expires. We all know Trump wants to replace Powell and is pressing for lower rates. We suspect a replacement will be named next week, and whoever that is, we suspect that person will be a bit more “dovish” than Powell. Should this happen, we would expect yields on this selection to fall.
- As we saw and reported on, pending sales of US existing homes fell in December by the most since April 2020, which is an unusual drop after the housing market appeared to be gaining traction. Contract signings declined by 9.30%. You can bet the current administration will use this number to continue the drumbeat to push rates down. To many, this number was a bit of a surprise; however, with the T-bills trading where they are, it is to be expected IMO.
- As we saw after Davos, Trump found an offramp for Greenland, indicating there is a path forward with Europe that reduces the immediate risk of a renewed transatlantic trade war, and this is why we are seeing the markets move up on the news. Equity markets are rebounding today and yesterday, with yields steady to slightly up.
- MUNIs, along with equities, dropped hard with the Greenland news this week. As mentioned, we are seeing a rebound over the last 24 hours. Yields were bumped by about 7bps across the curve this week when the President started speaking about Greenland. We saw yields move up 1bp yesterday, 1/21, across the curve as well. Again, if you are buying quality, this would be a good entry point, as things have cheapened quite a bit.
- Chicago will divide its annual advance supplemental payment to its underfunded pensions into two, a departure from paying the entire amount at the start of the year. We have been buyers of the insured debt, particularly the BOE paper, with short calls. If you wish to learn more about this debt, give us a call.
Bottom Line
Yields are elevated this week across the curve. MUNIs have had a good year up until this week; however, we are seeing yields down slightly post the “off ramp” for the Greenland issue. I would expect issuance to pick up over the next month, and there most likely will not be a rate move this month either. Overall, we are seeing a 75bps move this year (down) in FED Funds rates.
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.
Call us at 281-398-8600 to invest in these or any of our other offerings today.
