By Gayl Mileszko
Market Commentary
Bowled Over
Once America has a Super Bowl winner, we know the New Year has truly begun. For its first 35 years, the Big Game always took place during the first month of the year. That changed after 9/11 when games were delayed and the championship got pushed into February and somehow stayed there. In any event, a wave of melancholy accompanies the end of football season. Sports fans have the Milan Olympics this year, and early NBA and NHL games to watch, but otherwise there is a huge gap in excitement until March Madness and baseball’s Opening Day. Gamblers, who ponied up a record $1.76 billion in legal online and prop betting on the Patriots and Seahawks have little to do away from the casinos right now. However, the prediction markets, whose legal status is evolving, also saw Pats-Hawks wagers hit an all-time; Kalshi alone took in $1 billion of contract trading volume. They are already back at work taking bets on a government shutdown, Olympic medals, midterm elections, oil prices, and space aliens.
The Punchbowl
The Department of Homeland Security designated the Super Bowl as a National Special Security Event, a relatively rare status reserved for large or significant occasions such as presidential inaugurations, national party conventions, and Olympic games. The U.S. Secret Service takes the lead over all other federal, state, and local law enforcement agencies, and has responsibility for coordinating, planning, exercising, and implementing overseeing all NSSE security plans. They did a great job on Sunday, but on Monday their main job became lobbying for money to continue operating. USSS funding, along with all other Homeland Security agencies – everything from the Coast Guard to the Transportation Security Administration to the Federal Emergency Management Agency and Customs and Border Protection – expires at midnight this Friday. Another partial government shutdown, this one involving 260,000 employees responsible for most of America’s safety and security, has been threatened by a number of Members of Congress insistent on major changes in Immigration and Customs Enforcement training and practices. At this writing, heading into the long President’s Day recess, Republicans and Democrats are at an impasse. The drama over the outcome drags on in the U.S. Capitol, known by the Secret Service codename “Punchbowl.”
Roll Call on ICE
The last government shutdown lasted for 43 days but ended on February 3 upon enactment of an appropriations bill that covered the next seven months of funding for departments including Defense, Labor, Health and Human Services, Education, Transportation, and Housing. DHS got a short-term extension for 10 days and there is no question that it too will soon be funded for the remainder of FY26. But it is arguably the last must-pass bill of the second session of the 199th Congress and, given the extremely narrow margin needed for passage in the House, it offers a rare opportunity to attach riders, mandates, limitations, and other provisions to bowl over the executive branch. Wall Street is keeping an eye on the negotiating progress but has a bigger focus on the Kevin Warsh nomination, the tariff legislation moving through the House, as well as bills impacting affordable housing, critical minerals, and crypto.
Mixing Bowl
In the big mixing bowl this week, we have the ongoing nuclear talks with Iran, serious questions about possible secretive nuclear testing by China, the snap elections in Japan, and the NATO ministers meeting on Ukraine. Major economic data impacting stocks and bonds include retail sales, which unexpectedly stalled in December; January jobs data — which surprised with an increase of 130,000 in January while shaving off more than 400,000 in 2025 employment gains; the slight drop in unemployment to 4.3%, and the consumer price index out Friday, expected to rise 0.3% from last month and 2.5% year over year. There are nine Treasury auctions and 11 Federal Reserve officials on the speaking circuit, but no movement in the Senate Banking Committee on the Warsh confirmation hearings. Mr. Warsh has not made an appearance or given a statement since the President made his announcement on January 30, but that has not stopped futures trading on the direction of Fed Fund rates. At this writing, there is a 48% probability of a 25-basis point cut in June and a 35% probability of another October; there is no expectation, however, for any rate cuts or hikes in 2027.
Bowling for Dollars
Market expectations shifted slightly after the latest nonfarm payroll data and Congressional Budget Office debt projections sent Treasury yields higher on Wednesday. Bond traders are on edge, particularly curious to learn more about the terms of any new Treasury-Fed collaboration, a concept floated by Mr. Warsh last year. The Q&A from Senators will be of huge interest during the coming hearings, if various Members have their concerns about the subpoena of Chair Powell and the attempted firing of Governor Cook assuaged. Major corporate earnings reports are slated for release this week by BP, Ford, Martin Marietta, Spotify, Zillow, Humana, CVS, McDonald’s, and Marriott, among others. Commodity prices, which have dominated headlines for much of the year, have calmed down after some major price swings in recent weeks. On top of some profit-taking, the Warsh nomination separately sparked a major selloff over worries that a new Fed chair will press for tighter monetary policy and a stronger dollar. Silver has seen the most volatility in 40 years; gold is climbing back toward its all-time high on January 29 of $5,335 an ounce. Rate cut expectations, dollar weakness or strength, and bond yields remain key drivers in these markets.
Sugar Bowl
Municipal bonds are having a great year so far and our River’s Edge senior living financing last week illustrated the trend, value, and demand present in the muni. HJ Sims was the co-manager on the $632 million non-rated triple NYC tax-exempt issue for the start-up rental community in Riverdale, New York. Bonds issued through the Build NYC Resource Corporation were issued in six series and were oversubscribed. The final maturity in 2065 priced with a coupon of 7.00% to yield 7.13%. Retail as well as institutional participation overall is strong in 2026, fund flows are very good, and new issuance has been well received. All muni tenors, sectors, and ratings are performing well. Year-to-date high yield muni index returns as of Friday were outperforming Treasuries, corporate bonds, the S&P 500, and the Nasdaq. Municipal bond mutual funds took in a net of $2.4 billion last week, with high yield capturing $564 million of the total. This week’s calendar totals close to $14 billion after last week’s $9.9 billion slate. Investors received some $24 billion of principal and interest on February 1 and are scheduled to see another $11.5 billion hit accounts on February 15, all helping to fuel demand for higher yielding reinvestment opportunities.
Munis in the Fishbowl
In addition to the successful non-rated sale for River’s Edge last week, the muni market also saw an $86.6 million private placement for Thomas Jefferson University in Pennsylvania; the nonrated deal sold through the Lehigh County General Purpose Authority with a maximum yield of 7.125% in 2065. The Miami Dade County Industrial Development Authority issued $233.7 million of BB+ rated bonds for a student housing project at Florida International University; the final maturity in 2065 priced at 5.375% to yield 5.54%. And the North Carolina Medical Care Commission brought a $31.5 million non-rated financing for the Affordable Senior Housing Foundation portfolio that came with a coupon of 7.00% priced at a discount to yield 7.08% in 2055.
Bowl of Cherries
This week, muni yields remain attractive; there is solid demand for bonds, particularly in the 7-12 range of most interest to individual investors. Rates are also favorable for borrowers looking for new issue as well as refunding opportunities. The 2-year AAA general obligation municipal bond yield at 2.11% is 28 basis points lower than where it started the year. The 10- year at 2.60% is down 16 basis points. The 30-year benchmark yield at 4.29% has been unchanged since January 21. This week’s $14 billion calendar is led by a $1.25 billion offering by Houston Methodist hospital. It includes a $173.9 million BB rated transaction for Zeta Charter Schools in New York, and an $8.6 million BBB+ rated deal for Des Moines Christian Schools.
We mark the midpoint of the first quarter of the year, and wish all florists, chocolatiers, and sweethearts an unforgettable Valentine’s Day. Markets will be closed on Monday in observance of President’s Day, when we hope that the mattress and appliance discounters can turn around the retail numbers for February. We look forward to more of the extraordinary backflips, cartwheels, weddle grabbers, and curling sweeper performances from our Olympic athletes, and wish all the pitchers and catchers reporting for spring training a healthy season. We also welcome all updates from you, our banking and investing partners. Please reach out to your HJ Sims representative to bowl us over with your goals for this season.