Portfolio Managers Report: Post-Election Markets

Friday, November 15, 2024
MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino • Brian Schaff Natalie Regan • Aaron Stoffer • David Farris • Jeff Macy Josh Kiefer • Tom Toburen • Todd Czinege • Trey Valentine • Cody Kreutziger

US Treasury Market
Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
11/07/24	4.57	4.54	4.42	4.27	4.20	4.16	4.17	4.25	4.33	4.63	4.53
11/08/24	4.59	4.53	4.45	4.31	4.26	4.20	4.19	4.25	4.31	4.58	4.47
11/12/24	4.58	4.54	4.47	4.37	4.34	4.30	4.31	4.38	4.43	4.69	4.57
11/13/24	4.58	4.50	4.43	4.30	4.29	4.27	4.31	4.38	4.45	4.74	4.64
11/14/24	4.56	4.53	4.49	4.36	4.35	4.31	4.33	4.38	4.44	4.70	4.59

The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 11/14/2024.

Post-Election Markets

While the FOMC has largely met expectations over the last two months, lowering the Fed Funds rate by 75 basis points, the bond market has stubbornly refused to play along. Since mid-September, both two-year and ten-year Treasury yields have actually risen by more than 80 basis points. Two-year yields have risen from a recent September low of 3.53 to the current 4.36, while the ten-year has moved up from a 3.63 to a 4.47.

Now that we have nearly full election results behind us, market players remain a bit on edge about inflationary pressures under the new administration. Wednesday’s CPI and Thursday’s PPI reports came in very close to target and somewhat consistent with other recent data suggesting still stronger-than-expected growth. Chairman Powell spoke yesterday afternoon and stated, “The economy is not sending any signals that we need to be in a hurry to lower rates.” Just two days ago, traders were pricing in about a 72% chance that the Fed would lower once again in December, but that probability has now dropped to roughly 58%.

In the municipal bond world, the impact of a Republican sweep has generated much discussion surrounding the future of tax-exemption. This isn’t the first time that alarmists have warned that tax-exemption for municipalities could be taken away. The reality is that removing tax exemption would not raise that much revenue for the federal government, but would result in a significant increase in borrowing costs for state and local issuers, something that would be extremely unpopular for any politician currently in office or seeking to be elected. The more likely outcome may be further restrictions on the issuance of health-care, housing and Private Activity Bonds, relatively small segments of the overall market.

In general, we view tax-exemption as remaining very protected, and even if top tax rates are lowered, tax-equivalent returns on municipals will still offer generous spreads over Treasuries for those in higher brackets. Following the move in Treasuries, municipal yields have also risen in the last two months, and are back to levels not seen since early June. We continue to see good value in bank qualified offerings, particularly in the 15-20-year maturity range. Please reach out to your Capital Market Group representative if we can help in any way.

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value