Market Commentary: Centers of Attention

By Gayl Mileszko

Centers of Attention

William Theodore “Bill” Walton III was a 6-foot 11-inch center for the UCLA Bruins who captured the nation’s attention as the first overall pick in the 1974 NBA draft. A La Mesa, California native and son of a music teacher and librarian, he first signed with the Portland Trail Blazers. Within four years, he became the league’s Most Valuable Player.  Over time, he came to play for the San Diego Clippers and Boston Celtics in a 468-game career that was plagued with injuries. He retired at age 36 and was later inducted into the Hall of Fame.  In an extremely unusual move for a lifelong stutterer, he went into broadcasting and spent more than 20 years with CBS, NBC, and ESPN. Walton covered both college and NBA basketball with a unique spirit and style.  Sporting his iconic, tie-dyed Grateful Dead fan T-shirts, he was always a “center” of attention and relished his role as a celebrity ambassador for those with speech impediments.  In remembering him this week as he lost a long battle with cancer, colleagues recall that he always described himself as the “luckiest guy in the world” and reminded his audience in his unique way that “When everybody thinks alike, nobody thinks.”

Front and Center

Thoughts of every kind bounce through the global and social media this week as several one-of-a-kind events transpire. Front and center are the unprecedented and the troubling: A former United States president was convicted by a New York court on 34 criminal counts last Thursday and awaits a sentence to be handed down only days before a national convention is expected to overwhelmingly nominate him as its 2024 presidential candidate. The son of a U.S. president is being tried in a Delaware court on three felony charges related to his efforts to obtain a firearm while allegedly addicted to drugs. Mexico has just elected its first woman and first Jewish president. North Korea is floating hundreds of foul rubbish-carrying balloons across South Korea. A Chinese lunar craft unfurled the flag of China on the dark side of the moon. Canadian border patrol agents are preparing to strike. The U.S. Treasury yield curve has been inverted for the longest period on record.  All of this while dozens of heads of state gather in Normandy with surviving veterans for the 80th anniversary of D-Day, the largest seaborn invasion in history.

Profit Center

The financial markets are remarkably calm in spite of these unusual headlines and the bloody conflicts still underway in Ukraine and the Middle East. Volatility in stocks and bonds as measured by the VIX and MOVE indices are at 2024 lows. May came to a close with strong returns registered in stock market indices and most bond market indices. So far this year, the S&P 500 and Nasdaq are up more than 11%. High yield corporate bonds are up 1.63%. High yield municipal bonds are up 2.62%. The bond markets are seeing heavy primary issuance: Treasury auctions, corporate and municipal issues. Municipals saw $43.9 billion of new and refunding issues in May, bringing the year-to-date total to $191.3 billion, up 33% from last year. High yield corporate sales now total $142 billion. Investment grade corporate sales in 2024 exceed $765 billion.

Financial Center

The first quarter corporate earnings reporting season is just about over, and we approach the end of the second quarter. Yields are at the highs of the year.  At the close on Friday, the 2-year Treasury at 4.87% has increased 63 basis points. The 10-year at 4.49% is 62 basis points higher, as is the 30-year at 4.64%.  The 2-year AAA municipal general obligation bond yield at 3.35% has climbed 83 basis points, as has the 10-year at 3.11%. The 30-year yield at 3.96% is up 54 basis points.

Center Court

This week, traders will be closely watching the jobs numbers coming out on Friday.  They will also be following the rate decision made by the European Central Bank. U.S. economic data being released include job openings, manufacturing, factory orders and construction spending. There are six Treasury auctions coming on the heels of a weak series last week. Federal Reserve officials are in a quiet period ahead of the coming monetary policy committee meeting and dot plot release.  In Washington, Congressional hearings will include testimony from the Attorney General, FBI Director, and Anthony Fauci.

Center Stage

HJ Sims is in the market this week with a $15.8 billion charter school issue for Champion Schools in Phoenix, Chandler and San Tan Valley, Arizona. The borrower has a 25-year history and currently serves 1,342 students in pre-K to grade 8. Bonds are rated BB by S&P and are being offered in $100,000 denominations to accredited investors and qualified institutional buyers through the Sierra Vista Industrial Development Authority. Among other deals on the $16 billion slate is a $24.2 million Ba3 rated issue for Cornerstone Classical Academy in Jacksonville, Florida; a $14.8 million Aa2 rated credit enhanced issue for Treasure Valley Classical Academy in Fruitland, Idaho; and an $80 million BBB rated financing for Lutheran Senior Services in Missouri. We invite you to contact your HJ Sims representative for more information on the offerings available through our trading desk, and the structures our bankers are using to meet the current demand from buyers.