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Economic & Market Commentaries

Los Angeles Department of Water & Power 

As the Palisades Fire in Los Angeles County edges closer to complete containment, ramifications for the Los Angeles Department of Water and Power (the “Department”) remain uncertain.  To date, there has been no implication that the Department’s Power System infrastructure was responsible for igniting the fire. The investigation into ignition remains ongoing, led by the Bureau of Alcohol, Tobacco and Firearms.
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Los Angeles Wildfires

"Our thoughts are with our clients, business partners, and all individuals whom the Los Angeles area wildfires have impacted. Please note that this commentary is written strictly from a credit perspective and is not intended to minimize the devastating impact of this natural disaster on people and property..."
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Implications of Sales Tax Revenues on Municipalities

"Bank of America provides monthly updates on state tax revenue trends. In the Bank’s latest publication it noted that median sales tax collections in July are pointing to a 0.4% decline, which would be the second consecutive drop .."
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Is It Closing Time on the Short Duration Trade?

"It is often said that predicting market direction correctly is much easier than timing. We concur with that sentiment, and one only needs to point to the fact that a year ago Appleton highlighted the risk of holding short-term bonds despite attractive front-end yields. Those yields are still appealing, although with Fed Funds rate cuts likely on the near-term horizon it’s time to revisit the case for adding duration..."
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The Last Mile in the Fight Against Inflation: Shelter Costs

"A common refrain when discussing the Federal Reserve’s ongoing fight to quell inflation is “the last mile is the hardest.” On one hand, progress so far has come faster than many had anticipated, with both headline and core inflation falling below 4% before the end of 2023. This was largely due to volatile non-core food and energy prices, however, and core goods, where supply chain normalization has allowed transitory-after-all price pressures to quickly fade..."
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The Case for 2024 Rate Cuts: Growth Is No Reason Not to Cut

"After months of discussions about how deeply the FOMC would cut rates in 2024, nothing speaks to the rapid shift in market sentiment better than the number of questions we’ve fielded recently about why the Fed should cut rates at all this year..."
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2024 Municipal Sector Outlook

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A Distorted Landscape: How Debt-Weighted Bond Indices Create Investor Risk

"One of the unexpected challenges of managing fixed income portfolios is how much of the capital markets have an equity bias. From regulatory guidance to risk measurement conventions, much of the framework of the markets we trade in appears to have been written primarily with equities in mind..."
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The Case for Adding Duration

“This summer we started suggesting investors consider rethinking their bond portfolio duration. After abrupt selling pressure subsequently pushed longer yields up another 70 bps at the end of Q3 and into early October, more support for our view appears to have developed. If the argument was strong then, it is even more compelling now, with bond yields higher than they have been in nearly 20 years.”
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Municipal Credit Implications of a Federal Government Shutdown

“There have been 14 federal government shutdowns since 1981 with nine lasting more than one business day. While federal employee furloughs and interruptions in federal aid distributions may cause very short-term adjustments for municipal issuers, based on past experience, we believe that a federal government shutdown that lasts beyond a few weeks would have minimal impact on the creditworthiness of municipal bond issuers.”
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