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    Capital Markets | 4 min read

    Market Commentary: Week of June 24, 2024

    What a roller-coaster of a week last week. To be clear, I’m only speaking about my family trip to Universal Studios in Orlando, Florida, during the latter half of the week. I no longer have the stomach for the thrill rides (and market action has provided more than enough up and down price action to satisfy any thrill-seeking urges). Still, my kids thoroughly enjoyed the rollercoasters at the parks. Contrarily, as expected, interest rates chopped around in a consolidation pattern last week, ending very nearly where they started, around 4.24% on the 10-year US Treasury Note. Following the previous week’s volatility in the market, with the Juneteenth holiday on Wednesday bifurcating the available trading days, the market had every reason to hit the pause button on price volatility.

    The strong participation during the most recent Treasury auctions continues to suggest that the market is leaning heavily towards expectations of easier Fed policy in our near future. Presently, the market is pricing slightly better than even odds for a September cut by the Fed. With continued chatter about the September meeting, we must not forget that the Fed has meetings scheduled for July 30-31 to provide some insight into their policy initiatives prior to the much-lauded September meetings. Furthermore, there will be plenty of data to digest as we move into Autumn, including core-PCE (the Fed’s preferred metric for gauging inflation) to be released on Friday, June 28.

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    The municipal market followed the lead of Treasuries last week with relatively muted activity. The below-average new issue calendar offered little inspiration for investors to aggressively attempt to put cash to work. At SWBC, we are focusing on the supply/demand dynamics of the market and listening to the tone of the discussion from clients regarding their limited urgency regarding purchasing paper. One common theme has persisted over the past several months, regardless of the expectations for changes in interest rates. Specifically, investors remain uninspired by the belly of the curve. As indicated in the above chart, the 4-year to 12-year portion of the municipal curve has remained relatively flat (even rising modestly in some spots) despite declining interest rates along the shorter and longer-dated parts of the curve. Investors that have pursued a barbell strategy, focusing upon the sub-2-year area and the 15 to 25-year areas, have benefitted in terms of recent performance.

    With an above-average of $11 billion in supply coming to market this week, we expect investors to refocus attention on investment opportunities. Supply should be well received and digested by the market. We again highlight that any meaningful back-up in rates towards the April highs should be viewed as a buying opportunity by investors, especially given longer-term expectations for lower interest rates as Fed policy starts to suggest lowering the Fed Funds Target from the restrictive stance that began in March 2022 with the initial rate hike.

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    An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.

    The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.

    Investing involves certain risks, including possible loss of principal. You should understand and carefully consider a strategy’s objectives, risks, fees, expenses, and other information before investing. The views expressed in this commentary are subject to change and are not intended to be a recommendation or investment advice. Such views do not take into account the individual financial circumstances or objectives of any investor that receives them. All indices are unmanaged and are not available for direct investment. Indices do not incur costs including the payment of transaction costs, fees, and other expenses. This information should not be considered a solicitation or an offer to provide any service in any jurisdiction where it would be unlawful to do so under the laws of that jurisdiction. Past performance is no guarantee of future results.

    © 2021 SWBC. All rights reserved. Securities offered through SWBC Investment Services, LLC, a registered broker/dealer. Member FINRA & SIPC. Advisory services offered through SWBC Investment Company, a Registered Investment Advisor, registered as such with the US Securities & Exchange Commission. SWBC Investment Services, LLC is under separate ownership from any other named entity. SWBC Investment Services, LLC a division of SWBC, is a nationwide partnership of advisor.

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    Christopher Brigati

    Prior to joining SWBC, Brigati was Senior Vice President, Managing Director of Municipal Investments at Valley National Bank. With over 25 years of experience primarily in the municipal market, he is a recognized thought leader in the fixed-income markets and is a regular contributor with appearances on Bloomberg Television and Radio. He has authored numerous economic commentaries and his insights have been featured in leading financial media publications, including The Bond Buyer, The Wall Street Journal, and Bloomberg. Brigati has also been an active participant with the Bond Dealers of America (BDA) trade association, advocating regulators and legislators on Capitol Hill on behalf of the broker-dealer community. Before joining Valley National Bank, he served as Managing Director and Head of Municipal Trading at Advisors Asset Management, Inc. (AAM). Before that, he had a long career at Morgan Stanley where he served as Managing Director and Head of Wealth Management Municipal Trading for eight years. Brigati holds a bachelor’s degree from The State University of New York at Albany School of Business. He is registered for Series 3, 4, 7, 24, 53, and 63.

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