by Gayl Mileszko
The global population climbed to 8 billion people on Tuesday, November 15, according to the United Nations, up from 5.3 billion in 1990. More than half of us — an estimated 5 billion — from every nation, ethnicity, faith, age range, income level and occupation will watch some or most of the FIFA World Cup games during the 29 days of competition underway in Qatar. Here in the United States, about one in three adults consider ourselves to be soccer fans. 26% of us expect to watch at least some of the tournament. That’s not quite as many as those of us who ate turkey on Thanksgiving (88%), or went shopping between Black Friday and Cyber Monday (50%), or watched the last Superbowl (30%), but it is more than those who attended a major league baseball game (23%) or played a round of golf (11%) last year. At last count, Americans had purchased 146,616 tickets to matches at one of the eight stadiums in or near Doja, but the vast majority of U.S. futbol fans will be watching on television or via streaming.
Fans
Not billions but millions of people around the world tune in to the monthly press conferences held by Jerome Powell, the head of the U.S. central bank. These events are shorter in duration and much less exciting than the World Cup games but produce just as much if not more wagering. The next Federal Open Market Committee meeting is the last scheduled one of 2022 and will be held in Washington on December 13 and 14. Officials will release the quarterly Summary of Economic Projections, including the closely followed “dot plot”, so that investors will see their latest expectations for maximum rates and averages going forward. The Federal Reserve Chair’s carefully crafted words, tone, and delivery at the press conference are critical to market understanding of key voting member concerns, commitment to stated policy, and expectations for benchmark rates in the coming months.
Standings and Upsets
In the financial arena, stocks have had mixed results in November with only 2 days to go. Volatility has fallen 14% but the Russell 2000 has fallen 0.9%, the Nasdaq is up only 0.6% while the S&P 500 has gained 2.4% and the Dow is up 3.4%. Oil prices have fallen nearly 11% during the month to $77.24 a barrel while silver prices have gained 9.6% and gold is up 6.6%. As a result of several crypto firm bankruptcies, Bitcoin prices have plunged 20.5%
Municipal Bonds Advance
Municipal bonds are enjoying their best month in at least 36 years. The Bloomberg Municipal Bond Index is up 4.06% as of November 25; the high yield index return is 4.17%, and the taxable muni index has gained 4.38%. Investors flush with cash from redemptions and maturing bonds are grappling for the few bonds available in the primary market and pushing secondary market prices higher. Yields have fallen by an average of 56 basis points across maturities from 2 years to 30 years in just 18 trading sessions. At this writing, the 2-year AAA general obligation benchmark yield stands at 2.62%, the 10- year at 2.81% and the 30-year at 3.56%. The spread between the 2-year and 30-year has remained stable at 94 basis points.
Tax-Exempt Outperformance
As volatility in bond markets has declined dramatically from near record high levels last month, munis have quietly but consistently outperformed taxable counterparts and most other asset classes. The 2-year Treasury yield at 4.43% has only fallen 5 basis points in November, whereas the comparable AAA muni yield has plummeted 56 basis points. The 10-year government yield at 3.68% is down 36 basis points while the tax-exempt yield has dropped 58 basis points. The 30-year Treasury at 3.72% has fallen by 44 basis points, whereas the long muni benchmark is down by 56. Muni bond buyers are presenting demand for credits in every sector, state, and maturity as well as for products offered by exchange traded funds and tax-exempt money market funds. Only conventional mutual funds have fallen out of favor: investors have withdrawn more than $129 billion since the start of the year, and assets under management have declined 15% to $732 billion. Corporate bonds, which have seen the lowest level issuance since 2008 this year at $99.5 billion are also meeting with heavy demand: high yield funds have taken in $11 billion this month in five weeks of steady inflows.
Volleying for Bonds
The World Cup is a showcase for some of the most talented athletes on the planet. True fans of the global sport of soccer celebrate the peaceful competition between the 32 qualifying teams and manage to separate the sport from the conduct of the governing body and the flaws, sometimes heinous, of the host nations. On Wall Street, the thrill of victory and agony of defeat are experienced throughout the course of every trading day but it is usually only the most stunning of losses, such as the bankruptcy of FTX, that makes the headlines. In the $4 trillion municipal bond market, the original ESG showcase and the sector responsible for financing more than three quarters of state and local infrastructure in the U.S., about $14 billion quietly changes hands every day in the course of 50,000 trades on average. The competition for bonds can be intense; orders for new deals can be oversubscribed by many times and prices for bonds in the secondary bid up. We expect to see heightened demand again on Thursday, when $31 billion of principal and interest payments hit investor accounts.
HJ Sims Helps to Launch a New Idaho Charter School
During the last week of trading, shortened by the Thanksgiving holiday, the primary market was very quiet. HJ Sims brought the sole charter school financing, a $13.4 million non-rated financing for Kootenai Classical Academy, a start-up K-8 charter school in Post Falls, Idaho scheduled to open next Fall. Forty-year term bonds were issued through the Idaho Housing and Finance Association and priced at par to yield 7.25%. This week’s municipal bond calendar is expected to total less than $4 billion, with only 47 negotiated sales led by a $900 million Connecticut general obligation bond issue and a $115 million New Jersey Turnpike refunding. Buyers should have interest in the four charter school offerings. These include a $72.5 million Build NYC Resource Corporation social bond financing for BB+ rated East Harlem Scholars Academy, a $39.6 million Wisconsin Public Finance Authority deal for BBB-minus rated Triad Educational Services in Cary, North Carolina, and two Arlington Higher Education Finance Corporation transactions for Ba2 rated Magellan International School in Austin, and for Trinity Basin Preparatory in Dallas, rated AAA with the Texas Permanent School Fund guarantee.
Whether you are a striker, winger, attacker, defender, sweeper or goalkeeper, we invite your contact with an HJ Sims representative to review your holdings and strategy heading into the final trading weeks of the year.
For more information on offerings or questions about current market conditions, please contact your HJ Sims representative.