By Gayl Mileszko
Market Commentary
Firing Range
We would be wrong if we expected relaxed, lazy days this August. Yes, the Supreme Court went fishing in June, the Congress is in recess until September, and our central bankers have no meetings aside from the annual Jackson Hole shindig scheduled, but it seems that President Trump is just getting warmed up. He has the whole stage and all the headlines to himself, so journalists, fans, and critics get no break during summer’s last stand. Executive orders are being issued at a frenetic pace; he has signed 181 of them on top of 45 memoranda and 78 proclamations to date. Thousands of federal workers have been laid off or accepted early retirement, and quite a few have been terminated. Most recently, this included the Commissioner of the Bureau of Labor Statistics and five members of the Puerto Rico Oversight Board.
Fireplaces
President Trump has been pressuring Fed Chair Jay Powell for more than 5 years, all but asking directly for his resignation, and threatening to fire him although recent Supreme Court rulings suggest that he cannot be terminated over policy differences. The cost overruns on the $2.5 billion building renovations are unlikely to constitute reason for cause. But now, with the departure of Adriana Kugler, the President will be able to appoint someone who both shares his view on the need for lower rates and has credentials sufficient to obtain Senate confirmation. In any event, the financial markets already began to feel more confident about having three rate cuts by the end of the year after the nonfarm payroll data came out last Friday. The size of the unexpected drop, and previous months revisions, sent shock waves through the stock market. Is labor signaling a fast growing weakness in the economy, investors wonder?
On Fire
Bonds have rallied in these first four trading days of August, a welcome turn of events after a mostly lousy July. Index returns for taxable munis and corporate bonds were slightly positive last month but Treasuries and tax-exempt munis suffered losses. Non-rated munis took a 1.21% hit, in part reflecting losses sustained by Brightline Florida, which deferred its July 15 interest payment on $1.2 billion of subordinated tax-exempt debt. This helped to drag down year-to-date index returns to negative 1.74%. High yield munis lost 0.97% in July and are now down 1.43% in 2025. Investment grade munis fell 0.29% and are now down 0.91%. BBB rated munis have lost 1.57% year-to-date and bonds out 22 years and longer are down 4.60%. The outliers, the best performers, are 6% coupon bonds, up 1.93% year-to-date and tax-exempts with 1- to 7-year tenors, now up more than 2.50%.
Fire Hose
A deluge of principal and interest, $36.8 billion, greeted muni bondholders on August 1. It came on top of $53.7 billion in July and $57.9 billion in June. Investors who wanted to put this money to work have found plenty of places to look. Tax-exempt money market funds took in $970 million last week alone and now have $136.8 billion of assets. Secondary market trading par blew past $361 billion in July; at $2.2 trillion par, year-to date trading volume is 20% higher than it was last year and 26% above the year-to-date level in 2023. New issue volume exceeded $61 billion last month, and some estimate that an all-time record was set. Year-to-date supply now tops $359 billion and may set a new high at $600 billion by the end of December.
Star Fire
Last week, HJ Sims came to market with an $80 million non-rated financing for Sunrise of Long Beach and Quality Senior Housing Foundation. Bonds were issued for the new assisted living and memory care community through the California Municipal Finance Authority and structured with a final maturity in 2065 that priced with a 6.625% coupon to yield 6.85%. Among other transactions on the $13.9 billion slate was a $32.8 million non-rated issue for Liberty Assisted Living in Ohio that had a 2045 maturity that priced at par to yield 6.625%. Athlos Leadership Academy in Minnesota brought a $22.6 million non-rated deal that included a 2065 term bond priced at 6.50% to yield 6.75%. The Green Charter School Spartanburg Obligated Group in South Carolina came to market with a $12.1 million sale featuring a 2060 maturity that priced at 6.75% to yield 7.00%. And Rogers Park Montessori School, a private school in Chicago sold $12.8 million of non-rated bonds priced with a coupon of 6.375% to yield 6.45%.
Firing Up
HJ Sims is back in the market this week with a $94.8 billion Ba1 rated Florida Development Finance Corporation issue for five Renaissance Charter Schools: Cooper City, Flagler, Four Corners, Pines Elementary and Middle School, and Tapestry. We expect as much as $17 billion of new issues to vie for attention, including a $985 million nonrated remarketing for Brightline Florida. Traders are also gauging the reliability of economic data, the chances of further downward payroll revisions next month, the chances of an unscheduled FOMC meeting this month or a 50 basis point rate cut in September. There are plenty of other pending matters that could move markets. New data on factory orders and durable goods. The OPEC+ oil price increases coming in September. Quarterly earnings from companies including Disney, Pfizer, Mc Donald’s and Caterpillar.
Fire Starters and Market Movers
More than three thousand Boeing workers are on strike, the Russian ceasefire countdown is underway, and a heavy tariff is being imposed on India as punishment for importing Russian oil. The Treasury has announced a $100 billion auction of 4-week bills after just selling a record amount of six week bills. A grand jury is convening to investigate claims that Obama Administration officials politicized intelligence back in 2016. The Texas Governor ordered the arrest of a group of 50 Democrats in the state legislature who fled to Illinois and New York to avoid voting on a redistricting map. American Dream bondholders await an appeal of the 50% cut, an $850 million reduction, in the assessed value of the mall by a tax court judge. Colleges are preparing to open while international students are uncertain as to their visa status. No, this is not going to be a lazy, hazy August. So stay in touch with your HJ Sims representative to help maintain perspective on the brushfires, the wildfires, the varying temperatures, and the hot opportunities in the markets.