By Gayl Mileszko
Bug On The Wall
These days, we wake in wonderment each morning, hesitant to open even one eye to read about what happened overnight — yet equally hungry to learn about the latest, sometimes earthquake-like, developments from Washington and the impacts they might have on our hometown, our business, our jobs and family. We think: if only we could be a bug on the wall in the Oval Office. The Speaker’s Office. The Office of the Senate Parliamentarian. The chambers of the Chief Justice. The boardroom of the Federal Reserve. If only we could. Then we could have a leg up, an advantage over all the nervous nellies, the ones with their hair on fire, the ones so pretentiously confident in their bullish or bearish trade calls, the ones so paralyzed by fear. Would we then worry less having this “insider” knowledge, even if we did not trade on it — or could we hear things that would make us worry an awful lot more?
Detox
This week a lot of news is being dumped on us. We have to sift through all manner of disputes between the executive, judicial and legislative branches. Bold headlines from the White House continue to capture most attention, but we shift some spotlight to our central bank and the snippets of information gleaned during Q&A with its chairman. Federal Open Market Committee voters have released their quarterly Summary of Economic Projections, the infamous “dot plot” which reveals where they think rates are slowly headed. All of this keeps anxiety levels high. There are reports of progress, and backslides, in ceasefire talks as wars still rage on. The threat of a government shutdown is thankfully over, but we still have the debt limit, the budget deficit, the potential shakeouts from sweeping fiscal and foreign policy changes, troublesome inflation, and seesawing financial markets. There is a lot of buzz that that the U.S. economy may be slipping into recession. The Commerce Secretary says “No chance” and the Treasury Secretary says that there will be a “detox period,” referring to the major governmental restructuring and policy reversals underway, but that “there is no reason we need to have a recession.” Retail sales, consumer spending, sentiment and expectations, New York state manufacturing, and mortgage applications all came in worse than expectations, but not alarmingly so. This week, leading indicators are out along with housing starts and existing home sales.
Havens
Traders always keep a watchful eye on participation in the weekly Treasury auctions. Perhaps more so these days — given our reliance upon global central bank purchasing at a time when U.S. interests overseas are being redefined. This week, there are nine sales scheduled. The Treasury no doubt felt some relief when the 20-year auction saw well above average demand. There are always some economists and strategists bracing us for more inflation and Fed funds rate increases but, at least at this writing, futures traders still anticipate two quarter point rate cuts later this year. Investors, like the Fed, our allies and adversaries are in a wait-and-see mode. As such, many have moved to low-risk havens. The gold spot price at this writing is at an all-time high of $3,032 an ounce, up 12% since Inauguration Day. Municipal bond funds have taken in a net of $5.94 billion. Money market fund assets are at another all-time high, exceeding $7 trillion. Taxable municipal bonds are outperforming almost every other asset class; index returns are up 2.48% year-to-date, beating mortgages at +2.28%, treasuries at +2.25%, investment grade corporate bonds at +1.70%, preferreds at +0.96%, and significantly outperforming equities. At the close last Friday, the Nasdaq was down 7.92%, the S&P 500 had lost 3.86% and the Dow was 2.1% lower.
Fixed Income Stars
High yield munis are on a 3-year tear, outperforming most asset classes in 2025 with index returns up 0.73%, while high grade municipal bonds are now registering negative returns for the year. As credit analysis and surveillance is so critical in this space, be sure to check with your HJ Sims representative for the best performers, particularly in our specialty areas of senior living, charter schools, private schools, rural hospitals, and student housing. The 30-year triple-A benchmark yields at 4.21% are extremely attractive to investors, but traditional household buyers are being distracted by the extreme turnaround in the stock market, the opportunities presented there, the fact that not much principal and interest is coming back to them this month or next, the record-setting volume of supply coming to market, the high level of offerings in the secondary market, the paper price losses on existing holdings and the volatility linked with that of Treasuries. Last week saw the first net outflows in muni bond funds in eight weeks. In part, this is attributed to the need to raise cash ahead of April 15, and ugly proposals circulating for the possible elimination of – or cap on — tax-exempt interest income for some or all muni bonds. We encourage all our readers to become involved in advocacy for our municipal market by contacting your local, state and Washington representatives and sharing your stories with the BuiltByBonds campaign.
HJ Sims in the Market
HJ Sims continues to take advantage of volatile market conditions, fund inflows, attractive rates, and strategic opportunities for our borrowers and investors. Last week, we brought a $333.4 million financing for Mozaic Concierge Living, a new life plan community in Stamford, Connecticut. The non-rated bonds were structured with a final maturity in 2060 that priced with a coupon of 6.25% to yield 6.35%. We also underwrote the only charter school financing for the week: a $21.6 million non-rated financing for Kootenai Classical Academy in Post Falls, Idaho. The non-rated transaction was issued through the state’s Housing and Finance Association and had a final maturity in 2064 priced at par to yield 6.50%.
This Week’s Features
HJ Sims is bringing to market a $93.5 million BBB-minus rated financing for Triad Educational Services, K-12 STEAM-focused charter schools with more than 5,100 students in North Carolina. Bonds are being offered through the Public Finance Authority. Instead of trying to be a bug on our wall, just contact your HJ Sims representative to learn more about this financing and the many to follow on our forward calendar. Our banking, sales, trading, analytic, and underwriting desks welcome your questions and feedback on all of our offerings, and the many fantastic opportunities that we see in the primary and secondary markets ahead.