- Hammack (FED of Cleveland) indicated rates could be on “hold” while officials evaluate incoming economic data. She indicated, “Based on my forecast, we could be on hold for quite some time.” It will be interesting to see how these types of statements change (or don’t change) when the new FED president takes office.
- Speaking of FED Presidents, Lorie Logan (Dallas) indicated she is hopeful inflation will continue to come down. However, she indicated it would take a “material weakness” in the labor market for her to support rate cuts. The fact of the matter is that most of the street is seeking 100bps for this year. Regardless of these comments, it will be interesting to see what transpires.
- Demand for tailor-made investors is fueling a surge in personalized portfolios of MUNIs. SMAs that invest in MUNI assets now hold an estimated $ 1.3 trillion, up 6%. SMAs, which once were bought and managed only by the wealthy, are now popular with a broad range of clients as account minimums decrease across all platforms and B/Ds. DRL specifically specializes in this space and has seen a growing trend in this type of account over the past 3 years. We are finding our client base “wants to know what they own” and has a greater handle on credit quality. As many know, we specialize in personalization and enhanced service, and we are grateful for your business.
- If you are buying NYC private schools: the top private schools in the city plan to charge, on average, 70K per year in tuition. This amount will exceed many elite colleges, as they passed the costs of soaring expenses, including teacher salaries, along to the parents. We are reluctant to trade in this space and would advise caution as you seek paper.
- Yesterday, 2/11, T-bills fell, led by shorter maturities after stronger than expected US employment data prompted traders to trim expectations for the FED cuts in 2026. The move pushed yields broadly higher on Wednesday after the report, with the 2-year, which is the most sensitive to the bank’s policy changes, jumping as much as 9.5bps. Overall, it pushed yields up on MUNIs +3bps on the longer end of the curve 2/11. MUNIs so far have been somewhat steady for February, with no meetings in sight for the next 20 days; we expect this to stay the same for the month.
- US payrolls rose in January also by the most in more than a year, and the unemployment rate, as we saw, fell. This suggests the labor market continues to stabilize at the start of 2026, and as stated above, the expectations of cuts are moving down based on this news. As we have reported in the past, the labor markets will drive cuts, as inflation is in check and will most likely continue to be in check for the foreseeable future.
- FED Vice Chair Jefferson said he was “cautiously optimistic” about the outlook for the US economy, suggesting the strong productivity growth we are seeing. He also indicated he expects the “disinflationary” process to resume this year once increased tariffs pass through more fully to pricing. Overall, he and other FED members are indicating the economy is strong, and inflation appears to be in check at this time.
- This week, we have seen and will see: Payroll on Wednesday, CPI on Friday, and retail sales on Tuesday. All three will be viewed closely as the FED prepares for its next meeting. I expect a lukewarm CPI reading, with numbers continuing to fall slightly. Bloomberg maintains its call that the Fed will cut rates by 100bps in total this year. I suggest it be aggressive and target 75bps for 2026.
- Applications for US unemployment benefits rose by more than forecast last week. Furthermore, US companies announced the largest number of job cuts in January since the 2009 recession, according to data from outplacement firm Challenger. Companies last month announced job cuts totaling 108K, a 118% increase from a year earlier. Overall, we are sure this data point will be brought up at the next FED meeting.
- If you are buying New Orleans paper, the city had its credit rating cut two notches by Moody’s as weak finances and dwindling reserves push the city closer to Junk status. We expect this to remain a challenging situation, as the city’s reserves lag those of its peers. We do expect this to continue, and we would advise caution going forward.
- We have been reporting on poorly rated Charter Schools. The number of Charter school defaults surged over the past year, marking this the third straight year of mounting distress for the sector in the absence of federal aid and enrollment headwinds. There were 107 Chater schools with impairments as of January 21, up from the 78 at the end of January last year, according to a report by MMA. If you are buying this credit, we would suggest a conversation regarding whether the bonds are insured and by whom.
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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