Market Commentary: Calling the Shots

by Gayl Mileszko

It was fifty years ago on April 3, 1973, when Dr. Marty Cooper made the first public cell phone call from his clunky, personal, handheld, portable prototype as he stood on a busy New York City sidewalk. The 44-year-old Motorola engineer thought it would be amusing to make that first call to his company’s chief competitor at Bell Labs, Dr. Joel Engel. He punched in his rival’s number on a DynaT-A-C device that was roughly the size of a brick. It was something that he had developed in just 90 days while Bell’s focus remained exclusively on car phones. Due to manufacturing issues and red tape at the Federal Communications Commission, however, it took another 10 years before cell phones became available for sale to the general public. The first ones to come on line cost $3,900 at the time, were about 10 inches long, weighed 1.7 pounds, and took 10 hours to charge for each 35 minutes of talk time.

Cell Phones Have Reshaped Our Culture

Cooper, now 94, had no idea that a phone could become a camera and an encyclopedia, or that it would be used more for texting and streaming than talking, but he believed that it would eventually become so essential that everyone would be assigned a phone number at birth. Today, he sees many disadvantages in how the device has reshaped the way we relate to one another, but believes that, overall, the invention has changed humanity for the better. And he sees even more change coming. Before long, he predicts, we will all have a device embedded under the skin near our ears.

The Next Fed Rate Call

Embedded in the financial markets these days is the belief that the Federal Reserve’s next rate call on May 3 will involve a pause. The current Fed target rate is 4.75%-5.00% and futures traders are betting that this will be the peak, with cuts to 4.50% coming in September, 4.25% in November, 4.00% in December, 3.75% in January, 3.50% next May, and 2.75% by December 2024. That is not at all what Fed officials say they have in mind in their mission to bring inflation down to 2% by 2025. Forecasts released in the “dot plot” at the last policy meeting showed that the 18 central bankers expected rates to reach 5.10% by year-end.

Dialing Up Market Uncertainty

The steady push for higher rates, underway for a solid year now, has been a drag on the economy. Recent data reflects weakened job growth and consumer spending. But the Fed is not calling all the shots. OPEC+ just announced another surprise production cut almost instantly sending gas prices toward the $4 a gallon level. And the central bank’s attention has been significantly diverted by a banking crisis that began with the Silicon Valley collapse last month and may flare up in new ways as depositors shift funds from community and regional banks into money market funds or too-big-to-fail banks.

Recharging the Markets

Progress on inflation certainly helped to fuel gains during the first quarter, and these were broadly welcomed after a year of ugly losses. The Nasdaq gained 16.8% to close at 12,221. The S&P 500 rose 7% to finish at 4,109. The Russell 2000 at 1,802 was up 2.3% while the Dow ended nearly flat at 33,274. Stock market volatility as measured by the VIX fell 13.7%. Gold prices at $1,869 climbed 8% while oil fell 5.7% to $75.67 a barrel, and Bitcoin surged 72% to close at $28,432.

Taxable Market Briefly on Hold

The bond market saw some major swings during the quarter. The banking crisis and rates volatility ahead of the Fed meeting in March shut down the primary investment grade corporate bond market for 6 days and the high yield corporate market for about two weeks. Volatility as measured by the MOVE Index increased by 63% in mid-March but finished about 12% higher than at the start of the year. The inverted Treasury curve widened even further. The height of the curve remained with the 6-month bill, whose yield rose as high as 5.25% before ending at 4.85%, 10 basis points higher on the quarter. The 2-year Treasury yield fell 40 basis points to close at 4.02%. The 10-year at 3.46% dropped 41 basis points. The 30-year benchmark yield at 3.64% fell 32 basis points. In the corporate bond market, only $6 billion of new high yield issues came to market in March, bringing the first quarter total to $44 billion, down 15% from the first quarter of 2022. The investment grade corporate market, however, saw $106 billion of new issues, lifting the quarterly total to $404 billion; this was still 13% below 1Q22. The ICE BofA Treasury Index has returned 3.08% during the quarter, underperforming investment grade corporate bonds at +3.45% and high yield corporates at +3.72%.

Muni Flips

On the tax-exempt side, municipal bonds generally underperformed their taxable counterparts and experienced some extreme swings but, unlike in the corporate market, activity never paused. January proved to be one of the best months since 1993 but it was followed by February which was one of the worst in the last 15 years. Then March ended up being the best since 1990. During the first quarter of the year, the 2-year AAA municipal general obligation benchmark fell 22 basis points to 2.38%. The 10-year yield dropped 36 basis points to finish at 2.27%. The 30-year ended 28 basis points lower at 3.30%. The short end of the muni yield curve has been inverted since early December. On March 31, the 1-year yield at 2.49% was higher than that of the 12-year yield at 2.45%. The spread between the 1-year and 30-year was 81 basis points; at the start of the year the difference was 72 basis points. The ICE BofA investment grade muni index returned 2.82% in the first quarter. The high yield muni index was up 2.16% and the taxable muni index beat all other muni indices at +5.38%.

Calling All Borrowers and Bond Buyers

Municipal volume totaled $82.7 billion in the first quarter, with 1,677 issues coming to market with par amounts ranging from $115,000 to $530.9 million, with an average size of $49.3 million. Demand remains strong and rates are historically attractive, so borrowers and bondbuyers are encouraged to speak with their HJ Sims representatives about opportunities in the current market. In the final weeks of March, we saw no new publicly offered senior living bonds and only four charter school financings. The Public Finance Authority brought a non-rated $14.2 million financing for Excel Academy Public Charter School which priced at 7.60% to yield 8.351% in 2033.The California School Finance Authority sold $5.2 million of BB+ rated bonds for River Springs Charter School that came with a coupon of 5.75% priced to yield 5.85% in 2042. The Florida Development Finance Corporation issued $23 million of non-rated bonds for Parrish Charter Academy priced at 6.50% to yield 6.40% in 2058. And the Arlington Higher Education Finance Corporation in Texas brought a $64.1 million state-guaranteed deal for Uplift Education; the AAA rated bonds were structured with a final maturity in 2058 that priced at 4.375% to yield 4.55%.


This week saw the NCAA basketball finals and we congratulate the Louisiana State University Tigers and the University of Connecticut Huskies for their victories. There were 238 shots taken during the final contests and several records were set: the smallest audience, the most 3-pointers, and the most personal fouls in a title game, and the largest point total in a women’s title game. Amid all the dark news headlines of late, March Madness offered up rare but healthy chances for healthy cheering and friendly office wagering. We now turn our full focus back to events moving the markets, including the OPEC+ production cuts, the approach of Tax Day, the four Fed speakers on the circuit, five Treasury auctions, the indictment of a former president, the elections in Wisconsin and Chicago, the admission of Finland to NATO, the Fed lending facilities, the upcoming corporate earnings season, and the week’s economic data releases, including the March jobs report on Good Friday.

The stock market is closed on Friday and there is very limited bond trading expected before the early close at noon. We at HJ Sims wish you and your families safe travels and happy reunions. Reach out and call someone who would love to hear your voice during these very special Passover and Easter holidays.

For more information on offerings or questions about current market conditions, please contact your HJ Sims representative.

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