Market Commentary: The Flavivirus of 1793

Toward the end of the 18th century as the new, permanent capital of the United States was being designed and built in the District of Columbia, attention was still focused on Philadelphia. It was the temporary capital after the Constitution was ratified, the hub of the new nation boasting 50,000 citizens, the largest city in the country and the second largest in the English-speaking world. But in the dry, hot summer of 1793, refugees arriving at America’s busiest port from the Caribbean islands brought with them a deadly scourge. The epidemic of yellow fever first attacked those who lived and worked on the waterfront and swiftly spread, carried and transferred by mosquitoes ravaging the city during the summer and fall, eventually claiming one in ten lives. President Washington, his Cabinet, Members of Congress and 20,000 others who could leave fled to the countryside. Those in other cities fearful of contracting the disease boycotted the entire area. The flavivirus was said to have originated in Africa and first came through the West Indies to North America in the late 17th century. Outbreaks afflicted those trading with the Caribbean for the next hundred years. But it was not until the deadly contagion hit Philadelphia that year when the cause and potential means of controlling it were debated. The city established a Board of Health to enforce sanitary regulations, but these met with little success. The federal government had no authority to act, the governor fell ill, the state legislature skedaddled, and so it was left to the mayor and a ragtag committee to try and save the citizens of the city. Little respite was had for more than three months until the winter frost came and put a temporary end to both the mosquitoes and the fever. The pestilence returned seven times in the next 12 years, producing familiar patterns of finger-pointing, evacuation, and isolation, eventually relegating what would late become known as the City of Brotherly Love to second tier status as a port. For many years, the cause and means of transmission were not known and there was no vaccine or treatment, although bleeding, purging, cleaning, blistering, vinegar camphor, mercury and jalap, opium, wine and quarantines were all prescribed.

Fast forward 227 years when the nation’s capital — and every great American city — has been hit by plague again. The novel coronavirus has effectively shut down the nation for 34 days and counting. This time, there is no safe place to escape. Although the cause and source are said to be known this time, the cure remains elusive and fear has spread alongside the disease. A second wave is possible but the prospect of annual recurrences for the next decade is unthinkable. Instead of boycotts, there are lock-downs that have shuttered schools and non-essential businesses. Social distancing, handwashing, gloves and masks, online learning, telemedicine, and home deliveries will be with us for a long while. The toll COVID-19 is taking will be measured in precious lives, once proud businesses, and a legacy of debt. Debates will continue for years if not generations as to when to impose and how to remove quarantines, whether policy cures are worse than the disease, what we need to do to prepare properly for the next one. Massive central bank action in close coordination with the Treasury has again set new standards for intervention in free markets and municipalities that have long treasured independence and self-reliance. It will prove difficult to not to look to them again when the next sniffle occurs or the next proverbial ship with a cargo of pestilence limps into a U.S. port.

Our nation’s healthcare leaders note that America is still on the upward slope of The Curve with a short way to go before case counts, hospitalizations and death rates slow. It was only seven months ago that we were laser-focused on another curve, the Treasury yield curve, when it inverted during a very different liquidity crisis last September. Since the President declared a national emergency on March 13, the markets have experienced extreme volatility as fear and uncertainty gripped the world. During the flights between safety and risk, the S&P 500 has risen 50 points to 2,761, the Nasdaq is up 317 points to 8,192, and the Russell 500 has gained about 2 points to stand at 1,212. Gold prices are up $184 an ounce to $1,714. Oil, primarily due to the Saudi-Russia production dispute has fallen nearly 30% to $22.41 a barrel. On the bond side, the U.S. 2-year Treasury yield has fallen 25 basis points to 0.24%, the 10-year is down 19 basis points to 0.77% and the 30-year has decreased 12 basis points to 1.40%. Ten-year Baa corporate bond yields have risen 83 basis points to 4.51%. More than $35 billion has been withdrawn from municipal bond funds but the 2-year AAA municipal general obligation bond yield is down 25 basis points to 0.87%, the 10-year has fallen 51 basis points to 1.10% and the 30-year tax-exempt benchmark has dropped 39 basis points to 1.93%.

Corporate bond issuance has been extremely heavy on both the investment grade and high yield sides as firms tap markets and bank lines of credit for as much cash cushion as they can get. Investors concerned with the ability of state, local and nonprofit borrowers to withstand the financial pressures stemming from the pandemic have effectively frozen the calendar for many new municipal issues although higher rated health care, higher education, utility and general obligation borrowers have consistently been able to enter the market. There is a $14 billion pipeline of deals on day-to-day status as investors await fresh disclosure on the status of projects previously financed. How have people and operations been impacted? Is there sufficient cash to meet all day-to-day needs for the next 6 months and pay debt service in full and on time? Buyers heavy with cash from April 1 redemptions are scouring an array of solid credits at attractive prices in the secondary market, including hospital, airport, mass transit, and utility bonds being tarred with the same brush regardless of liquidity position and debt service coverage. Operating under more stringent regulatory structures imposed after the 2008 recession, the major credit rating agencies are revising all sector outlooks as negative and swiftly downgrading those who are slipping below certain trigger points, no matter the cause or expected duration, adding to investor worry and uncertainty. Those who lived in Philadelphia in the late 18th century faced much darker days and more uncertain times. In the case of COVID-19, we do not yet have all the answers but we have a staggering array of federal, state, local, private, and central bank aid to help us handle this crisis and recover. Please continue to count on your HJ Sims representative as a valuable resource and trusted partner throughout this process.

Market Commentary: The Ninth Hole

Hope is slowly starting to fill the holes in every refrigerator, cash register, classroom, orchard, and airplane. As case counts decline and the prospects for treatment or vaccines increase, several states and counties are starting to re-open restaurants, hair salons, movie theaters, gyms, malls, construction sites, health care offices, churches, and parks, many of the places we once took for granted and have since missed dearly. Georgia. Tennessee. Alaska. Iowa. Colorado. Montana. Oklahoma. Utah. Rules are being lifted in phases in other areas for the first time six weeks while many urban areas remain in the early stages of planning. Since December, the COVID-19 pandemic has scorched the earth from Wuhan to Castro Barros, Argentina–inflicting pain and suffering on more than 3 million people, primarily seniors, as well as damage on both local and global economies. One German newspaper put together an itemized invoice for amounts due from China as a result of lost tourism and manufacturing. The State of Missouri is suing the People’s Republic for negligent and deceitful behavior that has led to deaths and losses that were otherwise preventable. In the end, individual states and nations will have to tend to their own wounds. Some parts of the world may take years to recover. Here, the amazing mosaic of sovereign states that comprise our federal republic will re-assemble sooner and stronger than ever.

There is a huge cost that we and other nations will bear, the size and extent yet to be calculated. We have yet to determine where we are in the process of impact and recovery. Are we halfway through, at the ninth hole of an eighteen hole course? Are we on the fairway or still in the rough? Assessing the course and its conditions is a full time job for many economists, industry lobbyists and state budget officers. The National Governors Association has proposed a federal rescue package of $500 billion, an amount that represents more than half of combined general fund spending for all states for the entire year. Members of Congress, mostly back in their home districts, are estimating the local needs. In effort to throw some cold water on the skyrocketing demands, and out of sheer amazement over the audacity of several looking to plug unfunded pension holes, the Senate Majority Leader Mitch McConnell suggested that what may be needed is to extend eligibility for filing bankruptcy to state governments. That gave the talking heads some new material for a few days. In the meantime, the Federal Reserve is issuing so much currency that it has actually become a mathematical impossibility for the Bureau of Engraving and Printing to keep up.

It has been hard to keep up with the directions of the financial markets as well. There are, as always, multiple forces and factors involved. One can explain negative oil prices, for instance, but it is nevertheless astonishing. There are many theories as to why stocks and municipal bond prices have been so closely correlated and why Treasury and municipal prices have diverged since March, but these are also all head-shakers. It has been hard for analysts to find the logic in many of the rallies and selloffs that we have seen in recent months. We attribute some to automated trading based on news flow, fund flows, speculation, and knee-jerk reactions. It seems that we need some new perspective every day on where we are and how we got here. So let us step back and take a look at where the markets have moved since the start of the year.

On the equity side, the Russell 2000 is down 386 points or 23%, the Dow has dropped 4,406 points or 15%, the S&P 500 has fallen 242 points or 2.70%, and the Nasdaq is off by 242 points, just under 3%. Compared with two years ago at this time, the Russell 2000 is down more than 17%, but the Dow is off by less than 1%, the S&P 500 is up about 8% and the Nasdaq has gained nearly 23%. With respect to key commodities, oil prices are down $48 a barrel or 79% since January, 92% since last April, and 81% from where they stood in 2018 at this time. Gold is up across the board with a gain of $190 an ounce of 12% this year and has gained 29% since last year and 29% from April of 2018.

On the bond side, yields are at historic lows. The 2-year Treasury yield has plunged 134 basis points to 0.22% over the past four months. The 10-year has fallen 125 basis points to 0.66% and the 30-year is down 113 basis points to 1.25%. In the past two years, the basis point drop in yields is even greater: 226 for the 2-year, 229 for the 10-year and 187 for the 30-year. Baa-rated corporate 10-year yields currently stand at 4.24% which is 54 basis points higher than where we opened 2020 but 66 basis points below where it stood two years ago. On the tax-exempt side, 2-year munis yield benchmarks at 0.90% have fallen 14 basis points this year and 10-year yields at 1.28% are down 16 basis points. The 30-year AAA general obligation bond yield is actually up 4 basis points to 2.13%. One year ago, muni yields stood at 1.57%, 1.87% and 2.55%, respectively. Two years ago, yields were between 97 and 123 basis points higher across the curve.

The municipal primary market has been quiet for two months. Some deals have fallen in to a black hole for now. Of the new and refunding issues successfully placed, the vast majority are high investment grade or insured. In the high yield sector this month, there were only a handful of deals. The South Carolina Jobs-Economic Development Authority sold $32. 6 million of non-rated revenue bonds for Avondale Senior Living. The single maturity in 2050 was priced at par to yield 4.00% and converts to 6.5% in one year. The Public Finance Authority of Wisconsin issued $24.8 million of non-rated charter school revenue bonds for the Utah Military Academy, structured with a 2030 term bond priced at 5.25% to yield 6.50%. The City of Minneapolis brought a $12.4 million BB-minus rated charter school lease revenue bond issue for KIPP North Star that included a 35-year maturity priced at 5.75% to yield 6.00%. The Michigan Finance Authority sold $7.8 million of BB rated refunding bonds for the Dr. Joseph F. Pollack Academic Center of Excellence that had a 2040 term maturity priced at par to yield 5.75%.

The lockdowns imposed as a result of the pandemic have produced financial stress on every sector of the market. Some are overpriced and some dramatically underpriced and all of this is due to lack of information. First quarter corporate earnings reports are illuminating conditions through March 31, but it will not be until late July that we will have data for damage done in April and May and June. To date, only about 350 municipal issuers and conduit borrowers within the universe of approximately 118,000 have publicly disclosed any details about how operations and expenses have been impacted. So investors are forced to speculate on the extent of illness, revenue loss, liquidity, resource needs, and aid being received from federal, state and other sources. As the month comes to a close, we encourage you to tap the many resources available to you through your HJ Sims advisor in the coming days as you explore opportunities and make informed investment decisions together.

Market Commentary: Down But Not Out

Before a big fight, reporters would always ask Mike Tyson what he thought would happen. The writers always wanted insight on the boxing style of his opponent and asked him to speculate about other guy’s lateral moves, how he danced, whether Tyson expected him to do this or do that, and how he would react. The youngest heavyweight champion in the world liked to talk and he always had a quote for the story. But once he cut the questions off altogether. “Look”, he said flatly, “Everybody has a plan until they get punched in the mouth.”

The man nicknamed Iron Mike and Kid Dynamite had quite a bit to talk about. By the time he was 46, he had racked up 50 wins and 6 losses, defended his title nine times, spent hard time in prison, declared bankruptcy, battled addictions, tried to make a comeback, lost his mother to a stroke and a 4 year-old daughter to a tragic accident. He labeled himself an annihilator and literally changed the game for fans, promoters and boxers worldwide. Back in the day, Mike Tyson was considered the epitome of pain and savagery by many and he left a wide path of fear and broken bones in his wake. This is generally how investors in the financial markets will look upon March of 2020.

The first three rounds of the new decade came to an end on Tuesday. But this is the United States of America and we have by no means suffered a knockout. Not even close. Nevertheless, all of our coronavirus related fears, national containment policies, raging oil battles, and expectations for global recession carry forward into April. And, now that our national shutdown has been extended, we know they will be with us through what we call the cruelest month into May.

Most of us who are not on the front lines of research, medical care, law enforcement, emergency services, national defense — and even the fourth estate trying to report on all of the aforementioned — are still adjusting to the stay-at-home orders and working around employer and school routines and demands, continuing to digest the daily White House Task Force briefings and announcements from state and local officials, closely following the progress of family, friends and neighbors in quarantine or hospitals, shaking our heads at the savagery of the pandemic, and sharing our bucket lists for all the life-affirming things we plan to do as soon as we are loosed from our studio apartments, man caves, and shared kitchen workstations. Case counts increase as expanded testing provides confirmation of the COVID-19 spread as a result of gatherings held a mere fortnight ago.

Governments around the world are taking unprecedented actions to restrict the movements of its citizens as well as those seeking to cross its borders, and this is greatly affecting supply chains, jobs, businesses and the greatest component of our economy: personal consumption. Schools across the globe are closed, factories are being repurposed from autos and whiskey to ventilator and hand sanitizer production, hotels and dormitories are being eyeballed as intensive care recovery sites, the National Guard is being mobilized to build mobile medical facilities, massive hospital ships have been sent to Los Angeles and Manhattan, and the Congress is looking at a fourth massive emergency funding bill. Trillions in direct assistance to households as well as grants and loans to airlines, railroads, and other businesses and needs are en route. And the financial markets respond to the aid, and talk of more aid, with temporary relief rallies that last until uncertainty and need surface again.

We are officially told that, despite all of our precautions and sacrifices, things will get worse in the weeks ahead, peaking in mid-month for some regions, later in others. Our glorious spring and holy days are about to be darkened by jobless claims, lost earnings, more shuttered businesses, widespread illness, and loss. But — optimists and patriots all — we power through these days, cheering for the doctors and nurses and scientists and manufacturers unbelievably hard at work, awaiting their lifesaving treatments, vaccines, protective devices, and cures while we are being advised to prepare, mentally as well as financially, not only for the bad numbers ahead, but for a recurrence and downturn in the fall. We are in between rounds right now, with the loud bells from February and March still ringing in our ears. There is a brief time out before the next bouts begin and volatility has dropped from the 50-year high set on March 16, when the Fear Index spiked to 82.69, topping the most recent high of 80.86 on November 20, 2008 and far from its half century average at 19.25.

U.S. stocks in general just suffered their worst quarter since 2008. For the Dow and S&P 500, they experienced the worst March since the Great Depression. Since January 1, the Dow Industrials Index has fallen 23%, the S&P 500, 20%; the Nasdaq, 14%; and the Russell 2000, best reflecting many of our smaller businesses, down 31%. For a number of reasons, crude oil is down an astonishing 67% this quarter, and gold is up 5%. Baa-rated corporate bonds maturing in 10 years gained 90 basis points to finish March at 4.60% and the major U.S. corporate bond indices suffered losses of 4.05% in 1Q2020. The world’s safe haven, U.S. Treasuries, however, stood strong, produced returns of nearly 9%. The 2-year government yield fell 133 basis points to 0.23%, the 10-year dropped 124 basis points to 0.67% and the 30-year shed 104 basis points to close the quarter at 1.34%. Just one year ago the long bond yielded 2.81%.

In March, municipals had their worst week ever. Investors trying to raise cash and meet margin calls, and institutions unwinding highly leveraged wagers, flooded the market with sell orders at fire sale prices will no distinction made between credits. Liquidity in a market seen as a haven second only Treasuries virtually dried up. During the week of March 18, total par volume sold peaked at $63.5B, the highest since the record selloff in mid-September of 2008. One week later, munis had the biggest price rally in history, a reversal that left traders breathless and investors relieved. By the time all the dust settled on Tuesday, the 2-year AAA municipal general obligation benchmark yield at 1.06% had gained only 2 basis points on the year and was 43 basis points below where it stood only one year ago. The 10-year muni yield fell 11 basis points to 1.33% during the quarter and was 53 basis points below the comparable 2019 level. The 30-year tax-exempt benchmark at 1.99% was 10 basis points below its 2020 starting point and 61 basis points stronger than where it was one year ago. After record-setting outflows in municipal bond mutual funds and with a primary calendar at a virtual standstill, municipal returns fell 3.75% in March. Despite the hottest start to the year on record, muni gains were reversed and major indices ended down 0.68% on the quarter.

Those who lived through the Great Recession know that the challenges we face now are decidedly different today, as are the threats to, and demands asked of, our citizens. Few, if any, comparables exist; some point to the Spanish Flu era and the two world wars for reference points. This pandemic is being viewed as a war different from the ones we once declared on poverty, on drugs, and on terror. It is being fought on two fronts, the one on disease protection and the other on economic protection. Public health officials and central banks have become the generals on the field, endeavoring to assure citizens that health care and financial systems are sound. The Federal Reserve and counterparts around the world have taken steps never before seen to provide for short term funding needs. The Fed acted with lightning speed to slash interest rates to zero, lower the rate that it charges banks for overnight loans, and began purchasing $700 billion of U.S. government and mortgage-backed securities. It relaxed the requirements for deposits that banks must hold as reserves to meet cash demand and increase lending, and is buying billions of U.S Treasuries from foreign sources in need of U.S. dollars. To stabilize a market short of buyers, the Fed is even now stepping in to buy investment grade corporate bonds and will soon start purchasing municipal bonds in the secondary market to ensure liquidity in markets that have never before required such support. All in all, it has been quite an action-packed 90 days for those who generally deal in more contemplative pursuits.

HJ Sims would like to let you know that we stand along with you, your families, your small businesses, employees and families during these challenging times. We encourage you to reach out if we can be of assistance directly or in referring you to other resources that may offer meaningful support. In the meantime, we invite conversations about your banking and financial needs, changes in your risk tolerance, interests, and goals. Over the course of our 85 years in the business, we have worked to attract an amazing array of talent that is available to serve you, our partners. In extraordinary times like these, we learn together, grow together, support each other, and celebrate our many day to day successes, small and large.

Market Commentary: On the Verge

At a meeting of the G-20 nations in Brisbane, Australia in November of 2014, Jim Yong Kim, President of the International Bank for Reconstruction and Development (World Bank), proposed a new way to help developing countries finance efforts against infectious diseases in the early stages of a global contagion. Three years later, as Ebola continued to ravage West Africa in a pandemic that killed more than 11,000 people and set back development there for more than a decade, the Bank looked to transfer some of the effective insurance risk to the financial markets by privately placing $329 million of Floating Rate Catastrophe-Linked Capital at Risk Notes. These were quickly dubbed “pandemic bonds”. Roughly modeled on catastrophe bonds from the mid-1990s that pay out in response to insurance claims for events like hurricanes and earthquakes, the principal would be transferred to the Bank’s Pandemic Emergency Financing Facility (PEF) to aid eligible developing countries with containment and relief efforts after a very specific series of events occurs. The 386-page prospectus outlines the order and magnitude of triggers: when an outbreak reaches a predetermined level of contagion, involves a specific number of deaths, spreads at certain speeds, and crosses international borders producing more than 20 deaths in any additional country. Determinations are made by a verification agent based on publicly available data as reported by the World Health Organization, and the maximum payout in this case is $196 million.

The 2017 Notes were issued in two classes: a $225 million tranche covering flu and coronavirus that was priced at LIBOR plus 6.50%, and a $95 million series covering Ebola and various fevers as well as coronavirus that priced at LIBOR plus 11.10%. Swiss Re Capital Markets, Munich Re, and GC Securities managed the sale, which was oversubscribed by 200%. Interest on the Notes totals about $36 million a year which, along with fees, are paid by donor countries including Japan, Germany, and the soft loan arm of the Bank. No payouts to the PEF have yet been made and due to the number and timing of triggers, it is unclear that any monies would be paid or that they would even arrive in time and sufficient quantity to be helpful. Although there remains considerable doubt about the official numbers, China reached the first threshold for fatalities weeks ago. But due to unsurpassed global efforts at containment, including the effective quarantine of half of China’s population — a staggering number that is twice the size of the United States — no other nation is close to reaching the next trigger point. The 2017 Notes are scheduled to mature on July 15 of this year and principal will be repaid to holders if no recognized event occurs. At this writing, the COVID-19 disease, now officially caused by the virus SARS CoV-2, is not a global pandemic, although officials at the National Institutes of Health believe that the outbreak is on the verge of becoming one. There are now 15 confirmed cases in the U.S and diagnosed infections in 23 other countries. The Notes are said to be trading at a discount now, reflecting market belief that the first payout may well be forthcoming in the next five months.

This year’s G-20 summit will be held in Riyadh in late November and the theme is “Realizing Opportunities of the 21st Century for All.” It is one of a number of international events planned for 2020, including the Summer Olympics in Tokyo, the G-7 at Camp David, the World Expo in Dubai, and the 75th Session of the United Nations General Assembly, any or all of which could be disrupted as a result of the spread of the deadly virus. Traders are alternatively spooked and soothed by the intraday news reports which dominate all headlines. As fourth quarter corporate earnings are released, the term “coronavirus” has been cited in 138 of 364 companies holding calls, and FactSet reports that 25% have referenced some type of impact or modified guidance. The progress of the disease cannot be known, so speculation is rife on the potential economic impact of the coronavirus on tourism, retail sales, production and demand for products ranging from pharmaceuticals to oil to baby carriages and semiconductors. Futures trading now reflects expectations for one or more rate cuts this year, with the first coming in July.

Through the first half of February, stocks fought to keep the rally going in spite of widespread virus concerns. As of the close on Friday, the Dow gained 4% or 1,142 points on the month to close at 29,398. The S&P has risen 154 points to 3,380, the Nasdaq increased by 580 points to 9,731 and the Russell 2000 added 73 points or 4.6%. Oil is up 1% to $52.05, while gold has lost $5.10 an ounce to $1,584. On the fixed income side, U.S. high yield corporates, with more than $50 billion of refinancings so far this year, and preferreds are the only sectors with positive returns on the month. Short Treasury yields have jumped 11 basis points to 1.42%, and 10-year yields have inched up 8 basis points to 1.58%. While 30-year yields have gained 4 basis points so far in February, last week’s government auction fetched a record low yield of 2.06%. The calendar of municipal issues hit a high for the year last week at $9.6 billion and yields this month are up imperceptibly across the curve. The 2-year AAA general obligation bond yield ended mid-month at 0.86%, the 10-year at 1.18% and the 30-year benchmark at 1.82%. Municipal bond funds have taken in $3.7 billion during the last two weeks, sending the inflow streak to a record high of 58 weeks.

HJ Sims was in the market last week with $28.3 million of BB+ rated New Hope Cultural Education Facilities Finance Corporation bonds for Morningside Ministries. The offering met with a strong reception and we sold the 2055 term bonds with a 5% coupon priced to yield 3.35%. Among other deals on the high yield slate, the Public Finance Authority of Wisconsin sold $21.5 million of non-rated senior living facility revenue bonds for Montage Living due in 2024 priced at 8.00% to yield 9.121%. In the education sector, the Arizona Industrial Development Authority issued $42.3 million of BB rated revenue bond for the Cadence campus of Pinecrest Academy of Nevada structured with a 2050 term maturity priced at 4.00% to yield 3.23%; the California School Finance Authority brought a $21.3 million BB+ rated financing for Fenton Charter Public Schools featuring a final maturity in 2040 priced with a coupon of 4.00% to yield 2.07%; and the Public Finance Authority issued $11.3 million of non-rate revenue bonds for 21st Century Public Academy that included 30-year term bonds priced at 5.00% to yield 4.21%. The Berks County Municipal Authority of Pennsylvania had a $19.5 million BB+ rated sale for Alvernia University that had a 30-year term bond priced at 5.00% to yield 3.59%.

This week, we will see more fourth quarter corporate earnings, the minutes from the January Federal Open Market Committee meeting, and economic data on housing, producer prices, and manufacturing. Qualifying Democratic presidential candidates will meet on the debate stage Wednesday night in Las Vegas. The $6.8 billion municipal slate includes a $90.2 million non-rated Pennsylvania Economic Development Financing Authority senior living revenue bond transaction for Quality Senior Housing and QSH/Pennsylvania, LLC, and a $36.2 million BB+ rated Lancaster County Hospital Authority issue for Saint Anne’s Retirement Community. Life plan communities will be the focus of the two-day HJ Sims Late Winter Conference next week in San Diego. We look forward seeing so many of you at our 17th annual event. For those unable to attend this year, we will be sure to share our highlights in the weeks to come.

Market Commentary: A Port in Any Storm

The MS Westerdam is a premium cruise ship of Italian design and Netherlands registry with 10 decks that was christened in 2004 and refurbished in 2017. Operated by the Holland America Line, and owned by Carnival Corp., the ship offers a Lincoln Center stage, a BB King Blues Club, 3 restaurants, 3 pools, shopping and a casino. Right now there are 2,257 souls aboard, including 802 crew members, and they are all in limbo off the southern coast of Vietnam. They departed from Hong Kong on February 1 on a two-week journey with calls planned on Taiwan and Japan but at this writing are now just in search of a port where they can disembark. Although the operator says that it has no reason to believe that there are any cases of coronavirus on board and no passengers are restricted to quarters. Thailand is the just the latest country or territory to turn them away for fear that some passengers are infected. Japan, Taiwan, Guam and the Philippines have previously blocked requests to dock. The plight of the Westerdam epitomizes the fear, dread and uncertainty surrounding the 2019 novel coronavirus. Centers for Disease Control officials say that Americans should not panic as the risk of contracting illness here is low. However, if you are on board the Diamond Princess, another Carnival cruise ship with 3,600 currently under quarantine in the port of Yokohama, Japan, the risk is substantially higher. Officials there say that they do not have the capacity to test everyone, but there are at least 135 confirmed cases, the largest such number outside of China. In Wuhan, a city larger than New York, there is an unprecedented quarantine of nearly 60 million people in effect and the 34 year-old doctor who first tried to raise the alarm about the outbreak just became one of the 1,000 casualties of the disease now officially named Covid-19.

Federal Reserve Chair Jay Powell singled out the coronavirus as one risk threatening a U.S. economic outlook which otherwise appears durable with steady growth and unemployment near a 50-year low. In testimony before the U.S. House Financial Services Committee on Tuesday, he noted that it is too early to say whether the effect of the virus on the U.S. will be persistent and material but that the outbreak could lead to further disruptions in China that spill over. Powell was on Capitol Hill for his semi-annual monetary report to Congress. He reminded Members that the expansion is in its 11th year, the longest such period of uninterrupted growth on record, with job openings plentiful, and employment gains benefiting all ethnic and racial groups and levels of education. With the economy “in a very good place”, he indicated that no further rate cuts are being contemplated unless economic conditions change significantly, and assured Members that the Fed is monitoring developments, prepared to respond accordingly. This was welcome news to markets that have jolted up and down and moved sideways based in part on fourth quarter earnings, easing trade policy uncertainty, and Federal Trade Commission antitrust investigations but mostly in response to coronavirus developments.

The central bank chair’s testimony was given much closer scrutiny than the President’s budget proposal this week. The $4.8 trillion spending plan highlighting spending priorities for FY21 was rolled out on Monday. As happens in every administration, the bulky document quickly became a doorstop as budget and appropriations committees begin their own drafting process. But given that campaigns are in high season as the new fiscal year begins, it is highly unlikely that anything other than a continuation at current levels will be approved by September 30. Five hundred miles north of the nation’s capital, the New Hampshire primary is underway at this writing and candidates will soon be heading to Nevada for the Democratic debate next week and to South Carolina for the primary to be held February 25. Financial markets are not yet focused on the race as they need to see the field pared down, but they remain on alert for a dark horse.

The month has so far favored stocks over bonds, gold and other havens as economic reports were all strong, China announced tariff reductions, the impeachment drama came to an end, and worldwide resources were marshaled to prevent the spread of the new strain of virus. The Dow is up 1,021 points to all-time highs at this writing while oil is down $2 a barrel to $49.57 and gold is off $13 an ounce to $1,576. The 2-year Treasury yield has risen 8 basis points to 1.39%, the 10-year is up 6 basis points to 1.56% and the 30-year has added 4 basis points to yield 2.03%. 10-year Baa corporate bond yields have fallen 5 basis points to 3.36% while AAA municipal general obligation benchmarks are all up 3 basis points despite a record 57th straight week of fund inflows totaling $1.6 billion for the most recent period. The 2 year tax-exempt yield currently stands at 0.87%, the 10-year at 1.18% and the 30-year at 1.83%.

So far this month in the high yield municipal market, the Port of Greater Cincinnati Development Authority sold $5.8 million of non-rated revenue bonds for a convention center hotel and demolition project that featured bonds with a three year maturity priced at 3.00% to yield 2.00%. Also on the $6.5 billion calendar last week, Burleigh County, North Dakota sold $22.5 million of non-rated revenue bond anticipation notes for Missouri Slope North Campus- SNF, LLC structured with non-rated bonds maturing in 21 months priced at par to yield 3.00%. The Public Finance Authority of Wisconsin came to market with a $21.5 million non-rated revenue bond issue for Woodland Place Senior Living in Spartanburg, South Carolina that had a single maturity in 2024 priced at 8.800% to yield 9.121%. The California School Finance Authority issued $19.3 million of non-rated bonds due in 40 years for the Alta Public Schools Obligated Group that came with a 6.00% coupon priced at par and the City of Minneapolis had an $8.6 million non-rated charter school lease revenue bond issue for Northeast College Prep structured with 2055 term bonds priced at 5.00% to yield 4.48%.

This week HJ Sims is in the market with a $28.6 million retirement facility revenue refunding bond issue for Morningside Ministries at the Meadows and at Menger Springs, Texas. The BB+ rated financing is being issued through the New Hope Cultural Education Facilities Finance Corporation. Among other financings on the $8.3 billion slate is a $25 million bond issues for the San Francisco Port Commission. The Maryland Economic Development Authority is bringing a $42.9 million BBB-minus rated student housing revenue bond issue for Bowie State University. The Arizona Industrial Development Authority has a $41.6 million BB+ rated financing for the Cadence Campus at Pinecrest Academy of Nevada. And Florida’s Capital Trust Agency plans a $34.8 million non-rated senior living revenue bond issue for Antares of Ormond Beach. The 30-day visible supply of munis totals $13.1 billion of which approximately 36% is expected to come as taxable bonds.

Markets are closed on Monday in commemoration of Presidents’ Day, and we are less than two weeks away from the HJ Sims Late Winter Conference. We invite all who have not yet confirmed your attendance to register and join us for our insightful CFO breakfasts and panels on topics ranging from strategies for stressed communities and those serving middle-income seniors to the future of medical cannabis. There will be an informative tour of La Vida Real and an unforgettable evening at the San Diego Zoo. We look forward to having you join us.

Market Commentary: Rosy and Riveting

It happened gradually but steadily and, as with most tectonic and demographic shifts, the movement was only slightly surprising once detected. Nothing was evident if you watched the supermen of the Super Bowl on Sunday. Or if you followed the recent CSPAN coverage of Senate floor proceedings, reported for boot camp at Fort Benning, plowed the back forty, or sat on the board of a Fortune 500 company. But some of the major changes rooted in WWII’s call to duty continue to build. There are still differences in position and pay to be sure, but the fact is that women now comprise the majority of the U.S. workforce, and the majority of the college-educated labor force. The Labor Department’s December payroll data reported that women hold 50.04% of U.S. jobs. Bureau of Labor Statistics numbers show that they comprise about 50.2% of workers with college degrees. The developments are rather ho-hum for college administrators who first saw women receive more than half of all bachelor’s degrees awarded in the 1981-82 academic year and who are now accepting more females than males into law and medical schools. But the numbers give pause to government statisticians, actuaries, insurers and social scientists, office designers, auto dealers, hoteliers, restaurant managers, clothing designers and many others, all hustling to adjust for, and cater to, a changing workforce.

Employment statistics for January will come out on Friday and forecasters are expecting our unemployment stats to stay a half-century low, with the rate for adult women at 3.2% and adult men at 3.1%. The U.S. expansion is in its eleventh rosy year, still growing at more than 2% per annum, borrowing rates are at historic lows, wages are rising. The President, in his third State of the Union Address — before House members who impeached him and Senate members about to acquit him — recapped the numbers and touted his priorities for the coming months. The world listened in for clues on what might come next from the White House during what promises to be a tumultuous election year, starting with the botched caucus results in Iowa on Monday and now moving up north to New Hampshire for the primaries next Tuesday where five women and nineteen men are competing for the Democratic nomination. Investors, weathered by years of savage political banter, are virtually inured to the political headlines and will not start paying attention until after the conventions. The laser-like focus of Wall Street and global financial centers is on the 2019-nCov coronavirus and the unprecedented efforts undertaken by the Chinese government to contain the spread with the largest mass quarantine in history. The direction of stocks and bonds has spun around like a weathervane in trade winds shifting with the latest updates from health officials and economists.

The first month of the new decade was riveting for U.S. bonds. While the S&P 500 fell 0.04% to 3,225 and the Dow was down 0.89% to 28,256, the U.S. Treasury index gained 2.56% and corporate bonds were up 2.38%. Treasury yields plummeted: the 2-year fell 25 basis points to 1.31%, the 10-year dropped 41 basis points to 1.50% and the 30-year sank 39 basis points to 1.99%. The S&P municipal bond index returned 1.63% and the high yield muni index was up 1.98%. Hospital bonds in the ICE BoAML sector index saw 2.18% gains and munis with maturities of 22 years and longer rose 2.32%. And taxable municipals, enjoying renewed attention for the first time since Build America Bond issuance a decade ago, simply outperformed most every sector and asset class with returns of 5.29%. At month end, the 10-year AAA taxable muni yield was 2.16%, down 37 basis points since the year began. The 10- and 30- year AAA tax-exempt general obligation bond yields fell 29 basis points to 1.15% and 1.80%, respectively. Municipal bond funds took in $8.9 billion of new money, setting a new 56-week record for investment. If you can even find a municipal bond to buy in this $3.8 trillion market, where dealer inventory is at 5-year lows, you will generally pay more than you did last month and the month before that. Prices are through the roof and, as Municipal Market Advisors warned, there is an “absence of investor credit discernment.” In this market, investors are encouraged to carefully review credits with their HJ Sims advisors in the context of their individual risk tolerance profiles.

February begins the month with another onslaught of cash from municipal bond redemptions, maturities and coupons. A total of $23.8 billon is expected to come due this month, while the supply of new issues looks to total only $13.1 billion. This week, the municipal slate is expected to add up to $7.5 billion, and is heavy with taxable university and tax-exempt hospital bonds. In the high yield sector, the City of Minneapolis is bringing a $7.9 million non-rated charter school lease revenue bond issue for Northeast College Prep. At HJ Sims, we are preparing for our Late Winter Conference in San Diego with a lineup of enlightening speakers, informative panels, and recreational activities ranging from golf to fishing, catamaran sailing and trolley tours. We invite you to join us at the Intercontinental Hotel from February 25 to 27 in the city known as the birthplace of California.

Market Commentary: A Matter of Degrees

The average lifespan back in 1868 was approximately 38.3 years. People were shorter and thinner and suffered all manner of chronic and infectious diseases. Dr. Carl Reinhold August Wunderlich, a German physician, psychiatrist, and medical professor was running the hospital at Leipzig University at that time. In the process of observation and diagnosis, he took the axillary temperatures of 25,000 patients using a foot long thermometer that required 20 minutes to register. Based on the curves he patiently plotted, he determined that fever was not a disease but a symptom, and that the normal human body temperature is 98.6 degrees Fahrenheit. His is the measurement that we have since used to determine the gravity of illness in everyone from newborns to centenarians. But the human body has changed over the years and researchers have been disputing the Wunderlich axiom since the early 1990’s. The latest of two dozen modern studies is from Stanford University, where researchers finds that the new normal is closer to 97.5 degrees. But, as one might imagine, revising the cherished dictums on clinical thermometry is a not a speedy process.

In Wuhan, China and in clinics, hospitals and doctor’s offices around the word, degrees matter. Temperatures of 99.1 or higher are raising alarms as possible symptoms of a coronavirus that causes a lethal form of pneumonia. Dry cough, muscle pain and fatigue may also present over the course of a week before an infected person feels ill enough to seek medical care. At this writing, there are 4,585 confirmed cases in 18 countries and the death toll has reached 106. The rapid spread of the disease has spurred herculean efforts on the part of health professionals and chilling fears among travelers and investors who recall the spread of severe acute respiratory syndrome (SARS) in 2002 and the Ebola virus in 2014.

Global financial markets, which have already withstood the shocks of U.S.-Iran hostilities, the U.S-China trade conflict, the approach of Brexit, and the impeachment trial of a U.S. president in the first three weeks of the New Year, became roiled again on Monday. Even though health officials remind us that the influenza has resulted in 12,000 to 79,000 deaths annually since 2010, reports on the spread of a mysterious virus caused a one-day selloff in stocks on exchanges in Asia, the U.S. and Europe. Bloomberg reported that the slide wiped about $1.5 trillion off the value of world stocks in one week. The Dow erased the entire month’s gains and the Russell 2000 fell 1.5%. Oil prices fell 13% to $53.14 per barrel and gold gained $57.41 an ounce. Money quickly shifted to bonds and the dollar until Tuesday, when traders viewed the degree of global containment effort as likely to prevent a major economic loss. So far in 2020, the 2-year Treasury yield at 1.44% is up 12 basis points. The 10- and 30-year yields have plunged 31 basis points to 1.60% and 2.05%, respectively. Alongside governments, 10-year Baa-rated corporate bond yields have fallen 29 basis points and both the 10- and 30-year AAA municipal bond benchmark yields are down 26 basis points to 1.18% and 1.83%.

Markets focused on the possible implications of an epidemic in China leading to a global health emergency would otherwise be obsessed with Thursday’s Gross Domestic Product number, Friday’s British farewell to the European Union, wagers expected to total $6 billion on Sunday’s Super Bowl, and Wednesday’s meeting of the Federal Open Market Committee, the first such gathering of the year. Voters this year present as a few degrees more dovish, as the Fed Presidents from Kansas City and Boston relinquish their seats to the Fed Presidents from Cleveland, Philadelphia, Dallas and Minneapolis. There are still two vacancies for the Board of Governors and the nominees await Senate confirmation. Investors will watch the press conference and take the proverbial temperature of the Chair and Committee members on inflation, repurchase agreements, and the virus. Futures trading reflects only a 12% chance of a rate hike.

The municipal market is expected to see only $5.7 billion of new issues this week and the 30-day visible supply totals a mere $10.1 billion while redemptions and maturities are expected to add $25.8 billion of cash to the yearlong manhunt for tax-exempt and taxable municipal bonds. The largest financings happen to be for hospitals in Florida and New York, and there are several other health system issues in North Carolina, Indiana and Ohio on the slate. In the high yield space, the Port of Beaumont, Texas has a $265 million non-rated issue with tax-exempt and taxable series for the Jefferson Gulf Coast Project, Howard University is bringing a $145.4 million BBB-minus rated taxable refunding with a corporate CUSIP. And the California Enterprise Development Authority has a $9.2 million Ba2 rated financing for the Academy for Academic Excellence.

From the world of academia, Dr. Matthew Lieberman will be a keynote speaker at the 17th Annual HJ Sims Late Winter Conference next month in San Diego. Professor Lieberman holds degrees from Rutgers and Harvard and directs the Social Cognitive Neuroscience Lab at UCLA, one of the first labs to combine social psychology and neuroimaging. He measures and maps brain activity to demonstrate how we are wired to have a natural preference for switching from non-social to social tasks, how putting our feelings into words can have a soothing effect on those emotions, and how we might be able to help people who disagree come together without being disagreeable. He contends that our need to connect with others is just as important, if not more, than our basic need for shelter and food. So we invite you to hear his remarks, join us at the InterContinental Hotel, savor dinner at the San Diego Zoo, and enjoy a tremendous networking opportunity by registering at this LINK.

Market Commentary: On Magic Mountain and Capitol Hill

Government, business, academic, humanitarian and other leaders and dealmakers from 117 countries gather this week at the ski resort in Davos-Klosters, Switzerland for the 50th annual invitation-only meeting of the World Economic Forum. This year’s theme is “Stakeholders for a Cohesive and Sustainable World” and the thousand-odd journalists covering the events on the “Magic Mountain” will once again be taking the proverbial temperature of the global elite on topics such as cybersecurity, climate, e-commerce, inequality, reskilling, rural mobility, and the future of healthcare. The combined wealth of attendees, on a per-square-foot basis, will likely set a new record and the menu as well as the agenda will be a topic of lively debate. Half of the 70,000 meals for participants, staff and security will feature a plant-rich flexitarian plates such as broccoli mousse with toasted pignoli, and maple-smoked haloumi cheese with mint dust.

President Trump is delivering a keynote speech to the Forum at this writing. In his scheduled meetings with the Presidents of the European Commission, Iraq, Switzerland and Kurdistan, and the Prime Minister of Pakistan, he is accompanied by his Secretaries of Treasury, State and Commerce, his U.S. Trade Representative, and Deputy Chief of Staff for Policy Coordination. While they represent the nation overseas, the U.S. Senate has convened on Capitol Hill in Washington for only the third time in history to sit as a court of impeachment. The first day of the trial began on Tuesday afternoon with votes on rules to govern the proceedings. Senators will be living on snacks in the cloakroom for several weeks of marathon proceedings while reviewing the facts and reflecting the proverbial temperature of the nation on the charges against the President. At this point, no one expects conviction and removal, but the political process is back in progress and has been known to have some twists and turns.

The Chief Justice of the Supreme Court is a thousand feet away from colleagues concurrently considering a long calendar of unrelated cases while he is required by the Constitution to preside over an entirely separate branch of government, again for only the third time in history. The rest of the country nevertheless proceeds with more routine matters. At the Federal Reserve, the Open Market Committee prepares for its first monetary policy meeting of the year. The Treasury is auctioning $78 billion of 3- and 6-month bills and $80 billion of 4- and 8-week bills and planning to re-issue 20-year bonds. The Centers for Disease Control is immersed in identifying and preventing the spread of the deadly new Wuhan coronavirus. The Census Department has kicked off the decennial population count in rural Alaska. Democratic voters in Iowa are getting ready to caucus.

On Wall Street and at Davos, investors are sitting on a lot of cash but many are very confused about when and where to put it to work. Last year, it paid to buy almost anything. This year, there are new concerns about the sustainability of the 121-month U.S. economic expansion, the 30-year bond market rally, the 11-year bull market in stocks, and geopolitical tensions that spiked at the start of the new decade. It is unclear how much help central banks can be in a future economic downturn. Trade conflicts persist, even after the Phase 1 agreement was signed with China and the Congress approved the Administration’s new trade deal with Canada and Mexico. There is still plenty of uncertainty remaining with Brexit and not much apparent reward for taking risks in nearly any global sector. Rates remain at historic lows and asset prices are elevated across the board. Cash may be “trash” in the eyes of some fund managers, but 10-year sovereign bonds yields in Germany, the Netherlands, Switzerland and Japan are still negative as are many returns after adjusting for inflation.

At the midway mark in this first month of the year, the 2-year Treasury yield stands at 1.55% and the AAA municipal general obligation bond yields 0.90%. The 10-year Treasury yield is down 9 basis points on the year to 1.82% while the comparable high grade muni yield is 15 basis points lower at 1.29%. The 30-year Treasury yields 2.28%, down 10 basis points from the start of the year, and the 30-year muni yields 1.94%, 15 basis points lower. Baa corporate bond benchmark yields are down 13 basis points to 3.57%. The Russell 2000 Index is up nearly 2% to 1,699, oil prices are down 4.1% to $58.54, and gold prices have risen 2.3% to $1,557 an ounce. The normal ratios of stocks and bonds, municipal bonds and Treasuries, are askew. There are also increasing pressures for more socially conscious or green investing and attention to environmental credit risks and concerns about where markets are heading in this era of central bank interventions, high budget deficits and extraordinary debt levels.

At the 17th Annual HJ Sims Late Winter Conference next month in San Diego, we are fortunate to have Robert Genetski, as one of our keynote speakers. “Dr. G” is one of the nation’s leading classical economists who takes the voodoo out of the science and provides valuable insights on the impact of policy on growth. He is a Blue Chip interest rate forecaster who will endeavor to help us anticipate where we are heading as borrowers, investors, employers and citizens. We invite you to join us and participate by registering at this LINK.

The municipal bond market is still riding high thanks to favorable technical factors of supply and demand. Fund flows have been positive for 54 weeks; $5.1 billion of new investments in muni bond funds were made in the last two weeks. Bloomberg just reported that the last time tax-exempt yields were this low, Dwight Eisenhower was president and Elvis Presley was releasing his second studio album. Munis are outperforming the Treasury market and Muni-Treasury ratios in the 1-15 year range are at record 35-year lows. This week, the primary market calendar totals $7.1 billion, up from $5.4 billion last week. The high yield calendar includes nearly a dozen deals, including our $41.5 million revenue and refunding issue for Henry Ford Village, a continuing care retirement community with 852 independent living units, 96 assisted living units, and 89 licensed nursing care beds. The non-rated bonds are being issued by the Economic Development Corporation of the City of Dearborn, Michigan.

Market Commentary: On the Cusp of Another New Year

In Chinese folklore, the Jade Emperor decided that there should be a way of measuring time and settled on a 12-year calendar. To designate the years, he decided to host a competition for naming rights. On his birthday, he called for a swimming race and invited all animals to participate. The first twelve to cross a wide river would win a spot on his new zodiac calendar. So the great race began and the quick-witted Rat convinced the kind and powerful Ox to give him a ride on his back. The Ox moved rapidly into the lead but, just as he reached the river bank, the Rat jumped off and finished ahead of him, earning his position as the first zodiac sign. The peeved Ox was followed by the Tiger, Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog and Pig, the final order of the zodiac.

Rats have long symbolized wealth and surplus in Chinese culture. They are said to be savers, but lack courage and can be stingy. Their love for hoarding can sometimes cause them to waste money on unnecessary things. Those born in the Year of the Rat are considered clever and industrious. The most recent Years of the Rat were in 2008, 1996, 1984, 1972 and 1960, half of which were good for stocks, half for bonds, none good for both. The next one begins on January 25, the Lunar New Year, which always occurs on the second new moon after the winter solstice. Feng shui grand masters see this year as the start of a new age. Many expect slowing growth, radical positions, impassioned protests, and more tension between countries. Some see great opportunities for wealth with best performances coming from energy, entertainment, land development, technology, and banking.

China’s Vice Premier Liu He, born in the Year of the Dragon in 1952, will be in Washington on Wednesday to sign a partial trade deal with President Trump, born in the Year of the Dog in 1946. The trade war between the two superpowers has generated much uncertainty for global investors for the last two years. And although markets cheer the accord, and relief to some businesses comes with the Phase One truce, for the time being tariffs continue to impact chemical makers, apparel retailers and auto parts manufacturers. A substantial percentage, perhaps close to two-thirds, of everything Americans buy from China will still be tariffed.

2020 in the Gregorian calendar is a leap year. It is a decennial census year, a presidential election year, and a year in which the United Kingdom and Gibraltar are scheduled to leave the European Union. Tokyo hosts the Summer Olympics, the World Expo opens in Dubai, and NASA launches a rover mission to study the habitability of Mars. The financial markets will focus on the eight scheduled meetings of the Federal Open Market Committee, beginning on January 28, but will also pay close attention to the Democratic primaries which start on February 3 and conclude with the convention in Milwaukee on July 16.

The new trading year began with the targeted U.S. MQ-9 Reaper drone airstrike that killed Iran General Qassem Soleimani followed by the deployment of 3,500 additional U.S. troops to the Middle East. Markets were roiled and investors fled to safe havens out of concern for retaliations and an escalation of conflict. Once Iran appeared to stand down, tensions very quickly faded and the U.S. rallies resumed. At this writing, the Dow is up 368 points since the start of the year, the S&P 500 is up 57 points, and the Nasdaq is up 301 points or 3.4%, while the Russell 2000 Index of small cap companies manufacturing or producing goods in the U.S. is basically flat at 1,668. Oil prices spiked briefly but have settled in the $59 range, down nearly 5% in 2020. Gold prices have gained $27 an ounce and stand at $1,549.

The bond market continues its 30-plus year-long rally, buoyed further by the temporary flight to quality. Although the 2-year Treasury yield is up 2 basis points on the year to 1.58% at this writing, the 10-year benchmark has fallen 7 basis points to 1.84% and the 30-year yield is down 8 basis points to 2.30%. $8.19 billion was added to high grade corporate bond funds in the opening week of 2020, and high yield funds reported inflows of $1.12 billion. Ten-year Baa corporate bond yields have dropped 11 basis points to 3.59%.

Municipal bonds are still on a tear. Yields, as measured by the AAA general obligation MMD scale, have compressed by another 10 basis points. The 2-year is at 0.94% and the 10-year at 1.35%. The 30-year benchmark at 1.98% is 105 basis points lower than where it stood one year ago. Continuing the 53-week pattern, municipal bond mutual fund inflows continue to set new records. Investors added an astonishing $2.89 billion into state and local government debt funds during the first, traditionally sleepy, week of January. More than $612 million was added to high yield funds.

During the first full week of issuance, $5.9 billion of bonds were issued and the high yield muni sector saw little activity. The California School Finance Authority sold $32.3 million of non-rated revenue bonds for Arts in Action Charter Schools that came with a 40-year final maturity priced with a 5.00% coupon to yield 3.67%. And the Build NYC Resource Corporation issued $9.3 million of non-rated revenue bonds structured with a 30-year term bond priced at 5.00% to yield 4.00%. This week’s $6.6 billion slate include a $23.5 million non-rated South Carolina Jobs-Economic Development Authority deal for Hilton Head Christian Academy. The 30-day visible supply of visible bonds totals $12.3 billion. On the cusp of a new calendar used by one quarter of the world’s population, we join in wishing all a Happy New Year.