By Gayl Mileszko
Market Commentary
America On Line
On the trading desk back in the dark ages, before iPhones, Uber Eats and crypto, we had landlines and faxes, hoot-n-hollers, and lots and lots of paper copies of everything. In the olden days of the ‘90s, if you wanted to talk to someone, you picked up a desk phone and punched in ten numbers, usually all memorized, or took them out for lunch or dinner. For sure, there were some staticky conference calls, but mostly conversations were on-on-one and dozens of people on the trading floor could hear your end of it. There was no such thing as privacy, or stepping out to make a call because you were literally tied to your desk for the whole day. Jokesters, teasers, spies, copycats, and supervisors were everywhere, awaiting a hot tip, an impossible promise, a titillating detail. Then came America on Line.
You’ve Got Mail
Those on Wall Street and then Main Street immediately fell in love with this personal global messaging capability. Even more, it offered a gateway to the unlimited wonders of the internet. For sure, the PC hardware was quite bulky and the dial-up process awkward. If you had only one phone line, you could only use the telephone or AOL, but not both. But no one who used it back then will ever forget that dial-up sound – the beeps and boops and skreecsh — as you got connected. And then the thrill of hearing “You’ve Got Mail” when a private message arrived in your inbox. It inspired the blockbuster movie starring Tom Hanks and Meg Ryan, released at the height of the AOL frenzy in 1998.
Dial-Up is Dialing Down
These days we are overwhelmed by email and texts and social messaging. We now spend too large a percentage of our days deleting them. There is still much to ferret out and cherish, but there is nothing private about what we type on our keyboards. What has become special these days is a phone call, a lunch, or a letter or card coming by snail mail. Surprisingly, AOL is still around and, believe it or not, thousands of people without access to broadband still use the pay-for-use dial-up service. On Monday, the internet pioneer just announced that it plans to discontinue the 30 year-old landline based connectivity as of September 30. AOL had once been the dominant online service provider, but by May of 2004, Google had seized the largest market share among all the search engines. And by 2009, Gmail overtook AOL as a top email provider. When it once sat on top of the world with a market cap of $222 billion, AOL bought Time Warner. Today, the company is owned by Yahoo, which is in turn owned by Apollo Global Management and Verizon.
Lagom
We cannot help but wonder what will become of Nvidia, Bitcoin, Tesla, and Brightline, big names in today’s headlines, three decades from now. Lagom is a Swedish word meaning “not too much, not too little, just right” – the Goldilocks goal of peace negotiators, but not so much growing companies or active investors. For us mere humans, it means adopting a balance and moderation in all aspects of life, being content with what we have, avoiding excess, and having a true sense of long-term well-being. That sure would be nice. However, we live in an interesting time, one that involves an attractive amount of unrestrained excess, and enticing though risky opportunities. There is FOMO – fear of missing out – even amid all the asset price volatility, unprecedented governmental interventions and dismantling, policy reversals and world order shakeups underway. Our political and economic environment has been, to say the least, unpredictable. But Americans do not let one CPI or Jobs report, tweet or podcast stand in our way. We have a ton of cash, seven trillion, sitting in money market accounts right now, and that is just one source of funding that might be available to help finance your start-up, acquisition, expansion or improvement project if you have a good story and an experienced financing team on your side.
Carpe Diem
To those waiting on the sidelines we say: seize the moment. Give your HJ Sims representative a call. Despite the uncertainty over tariffs and trade, interest rates, and the direction of the economy, six thousand seven hundred and twenty four muni borrowers came to market in the first seven months of 2025 and sold more than $359 billion of municipal bonds. At HJ Sims, we also helped a good number utilize bank financing options and private placements when they proved to be the best solution. By the end of the year, we look forward to seeing a record $600 billion or more of combined public sales, smashing all previous records. Nonprofits are not delaying deals in the hopes that rates will drop a quarter point — they are moving forward with strategic plans and capital needs now. Admittedly, the possible landmines – such as those that come in the form of unsettling economic data, an unexpected geopolitical development, new competition, a government shutdown, a cyberattack, bad weather, or jump in construction prices — are certainly overwhelming. And, with all the new artificial intelligence developments, we cannot help but wonder what wonders lie ahead to impact our industry. The technology, the speed, the data, the scale are all different from what we experienced in the ‘90s. But there is massive change underway, just like what happened in the early AOL era. And whether we are a senior living community, a charter or private school, a rural hospital, family or business, we have no choice but to embrace it all fully, lead where we can, and move forward.
Munis Meet The AI World
Across the asset classes, munis were late to adopt electronic trading. The first systems came out 25 years after Nasdaq did in 1971. They have since grown in number and automation, almost exclusively serving the liquid high grade bond market. Those of us who dominate the high yield space still rely upon our veteran human teams in banking, analysis, sales and underwriting. But artificial intelligence is today being used in everything from due diligence to credit surveillance. Things like notetaking, fine-tuning financing options, executing trades, tracking trade history, pinpointing trends, exploring what-if scenarios, and ensuring that compliance requirements are met, to name a few, are made easier, sometimes a lot easier. With algorithm-based technology and human oversight, buys, sells, tenders, and originations are becoming more efficient. Standardized reporting is producing greater transparency, and more transparency is bringing more liquidity. We rely on technology to tell us, for example, that last week’s muni issuance totaled a whopping $21.7 billion, that bids-wanted lists were up 22% over the 5-week average, and that funds took in net inflows exceeding $1.65 billion.
Little Cocoons, Big Opportunities
Amid all the turmoil over the possible loss of tax exemption, tariff and inflation worries, stock market record busters, heavy pressure on the Fed chair for cuts, historically high volume, and the reduced interest from insurers and banks, the muni market has been remarkably liquid. Understandably, bids wanted have spiked from time to time as buyers worked to make room for the new coupons coming out of the primary market, but overall demand has proven steady and strong enough to absorb the unusually large supply. In some cases, this has allowed us to reprice several maturities when oversubscribed during the order period so as to obtain more favorable rates for the borrower. Investors, mainly those with separately managed accounts, have made clear their preference for seeking safety in shorter maturities this year. Their buying practices this huge have skewed the yield curve and the market overall this year. Many have limited purchases to the one- to twelve-year tenors. These short bonds, along with taxable munis, comprise the only segments of the muni market posting positive returns in 2025. But for investors focused on coupon income and relative value, the intermediates and long end are some of the best places to look at right now. At this writing, the investment grade muni index returns are down 0.3% and nonrated munis are down 1.40%. But 3-to-7 year maturities are up 3.32% and taxable muni indices are up 4.34%.
Renaissance Charter School
Tax-exempt yields dropped across the board last week, and HJ Sims took full advantage of market conditions in our pricing for Ba1 rated Renaissance Charter School in Florida. We structured the $94.9 million financing with 5 term bonds; the final maturity in 2055 was priced with a 6.00% coupon at a discount to yield 6.20%. Bonds were issued through the state’s Development Finance Corporation to finance projects at five Renaissance Charter schools: Cooper City, Flagler, Four Corners, Pines Elementary and Middle School, and Tapestry. Among other charter schools on the slate last week was a $21.2 million non-rated deal for Orangeburg High School for Health Professions. Bonds were issued through the South Carolina Jobs-Economic Development Authority, and the final maturity in 2060 was priced at 6.625% to yield 6.75%.
Market Backdrop
The financial markets are dealing with quite a few potential market movers this week. The Trump-Putin meeting in Anchorage on Friday. Talks with European leaders on Ukraine. Tariff announcements. Six Treasury auctions. Six Federal Reserve speakers. The deployment of the National Guard in D.C. Buzz over the potential for a $500 billion Fannie Mae and Freddie Mac IPO. Talk of another White House rescission package to be dropped during the Congressional recess. It is not a quiet August. The municipal slate totals about $12 billion this week, and $9.6 billion of principal and interest payments will hit accounts, contributing to the $57.9 billion total expected this month.
In Line This Week
In the education sector this week, Basis Texas Charter Schools is coming with a $175.9 million Ba2 rated financing. Slam Academy of Nevada has a BB+ rated deal planned. Mater Academy of Nevada has an $18.6 million transaction, and Orangeburg High School for Healthcare Professions in South Carolina has a $20.9 million sale on tap. Among senior living deals, Fleet Landing at Nocatee in Florida plans a $333.4 million start-up financing, and Greenwood Village South in Indiana is offering $45.9 million of BBB minus rated bonds for an expansion project. At this writing, the AAA general obligation municipal bond benchmark yield in 2 years is 2.25%, 3.22% in 10 years and 4.58% in 30 years. For more information on current rates and offerings, please reach out to your HJ Sims representative by phone or email.