MacKay Shields LLC

Explore the benefits of investing in taxable municipal bonds. In this video, Sanjit Gill, CFA highlights how taxable munis may offer attractive long-term yields and attractive credit quality compared to corporate bonds. With most bonds rated -A or higher and durations extending up to 30 years, we believe they present a stable investment option, especially in a Federal Reserve rate cutting cycle. Click here to view more: https://lnkd.in/gGxfwBwu

It is not my base case that the easing cycle is over, but it is understandable why markets are now pricing in some probability of that outcome. Committee participants marked higher their inflation projections and the policy rate path. And the discussion during the press briefing around the incoming Trump administration implies that the rate path could be marked up further should the trade, immigration and fiscal policy preferences of the new administration come about. Please see our latest audio recording of Forward Guidance for details https://bit.ly/3Dkqp85

There are widespread expectations for a “hawkish cut” from the Fed this week – a rate cut but economic projections and other communications that signal less easing going forward. Some of this hawkishness will likely be evident in FOMC participants’ estimates of the longer-run policy rate, which is akin to the concept of a neutral policy rate that keeps the economy at full employment with low and stable inflation. The median projection for the longer-run policy rate has already been creeping higher over recent projection rounds, and I think the process is far from complete. I suspect that by the end of the year the median projection will be up closer to 3.5 percent. The longer the economy performs well, with inflation persisting above two percent, the greater the likelihood that Committee participants will reevaluate how restrictive the policy stance actually is. And the skew of individual participants’ projections – indicated by the shaded bands in the chart below - reveal that over the past two years, more and more participants have become convinced that the longer-run policy rate has risen meaningfully. The Committee has in mind a rate path that would keep the policy stance somewhat restrictive throughout 2025. For example at the September meeting, the median participant saw a year-end 2025 policy rate of 3.4 percent, 50 basis points above the median projection of neutral at that time. If that 50 basis point spread remains in tact over the course of the next year, but the median estimate of neutral drifts higher to 3.5 percent, it would suggest an end-2025 policy rate of 4.0 percent.

Taxable municipals bonds can be a strategic complement to core bonds in your portfolio, helping to reduce risk and generate income. Direct conversations with US allocators and model portfolio managers have led them to carve out a standalone position in taxable municipals to be paired with their traditional core managers. Our video explains how taxable municipals can potentially offer a reliable income stream and enhance your core bond investments. Watch to learn more.

In the latest episode of Forward Guidance, Steven Friedman and Michael DePalma discuss their views on how investors can navigate the fixed income market post US election. Click to view more: https://bit.ly/4g5DBMi

It was an honor to represent MacKay Shields at the annual Municipal Bond Women's Forum (MBWF) hosted by JP Morgan in New York City. It was great to see the record turnout of over 300 municipal professionals, gathered to discuss market developments and network. I was honored to moderate the panel on WHOW - Women Helping Other Women Panel to discuss trailblazing women in the municipal bond industry. Special thanks to the panelists’ insights from Capital Group, Nuveen, Rockefeller Asset Management, Eaton Vance and J.P. Morgan for the inspiring session. I was proud to represent MacKay Shields for its commitment and support at this collaborative event for our female employees. #MunicipalBondWomen's Forum

MacKay Shields is thrilled to announce we are sponsoring Insurance Investor Live | North America 2024, where we'll be hosting the Industry Insights session on The Changes and Opportunities of Channeling Capital into High-Yield Fixed Income for Insurers led by Joseph Maietta, CFA, Managing Director, High Yield   Join us at #IILNA24 to explore the latest trends, share insights, and network with some of the brightest minds in the insurance investment industry.   🔗 register to attend the event here: https://lnkd.in/eS9JYss5 🗓️ Date: December 5th, 2024 📍 Location: New York City

I was struck by a comment in Powell’s post-FOMC briefing that he repeated in his Dallas remarks this week – that core inflation excluding housing has returned to a level that is consistent with two percent inflation (see chart below). The logic for excluding housing inflation is that it represents a “catch-up” of lease renewals to current market rents, and reflects past inflationary pressures rather than current ones. This narrower view of core inflation would seem to support continued easing at upcoming FOMC meetings. But other views of the inflation data tell a different story, one where inflation is looking a bit sticky, if not stuck. Assuming a 27 basis point rise in the core PCE price index in October based on inputs from CPI and other data, core PCE inflation will have accelerated to a 2.8 percent annualized rate over the past three months, from 2.2 percent in August. In addition, trimmed mean CPI (which I see as a better measure of underlying inflation than core inflation) shows signs of plateauing at an elevated rate. I think there are still very good reasons to expect inflation to moderate over the next year; most importantly, the labor market is in better balance and continues to cool. But in the near term, given strength in the economy and recent firm inflation prints, Powell’s newfound caution on further rate cuts is understandable. As he said in his Dallas speech, “The economy is not sending any signals that we need to be in a hurry to lower rates.” And keep in mind that the new economic projections released at the December meeting will likely show a higher median year-end inflation projection, and a lower unemployment rate, than at the September meeting. Those revisions could complicate the communications around a December rate cut. At this point, a December cut is a close call. But regardless of the December meeting outcome, the bumpy path to two percent inflation and strength in the economy indicates less scope for policy easing over the next year or so. At this point I would not expect more than 100 basis points of further easing between now and the end of 2025.

In our latest episode of Forward Guidance, I provide a brief synopsis of the November FOMC meeting, including Chair Powell’s slightly dovish press briefing, before offering some early thoughts on the economic implications of the election. There has been much attention on potentially outsized changes to fiscal, trade and immigration policy. But I think some of the polices as implemented will turn out to be more constrained than advertised. View more here: https://bit.ly/4fz8ecA

In our latest specialty fixed income outlooks, we review how the US economy's shows strong, sustained growth with improved productivity and a stabilizing labor market, shifting investor concerns from recession to reflation. Follow the link to read our latest outlook: https://bit.ly/3YoHvse