By Gayl Mileszko
Hail to the Phryges
As many as 150 bateaux will transport an estimated 10,500 uniformed athletes from 206 countries around the world on a 3.5 mile floating procession along the Seine River that will end at the foot of the Eiffel Tower this Friday evening. It is being dubbed as the most magnificent boat parade of all times, and will be the highlight of the Opening Ceremony for the 33rd Summer Olympic games. Athletes will walk two miles from the Eiffel Tower to the Trocadero Garden for the official lighting of the Torch. It promises to be a spectacular show, held entirely outside an Olympic stadium for the first time ever. Approximately 1.5 billion are expected to tune into the nearly 4 hours of coverage beginning at 1:30 p.m. EDT. Paris — and all of France — have been preparing for these games for seven years, and event venues will showcase 17 other cities in the “Country of Love” including Teahupo’o in the French collectivity of Tahiti nearly 10,000 miles away, the site of the surfing competition. It has been 100 years since the City of Light last hosted Jeux olympiques d’ete de 1924; this year it will cost the host nation an estimated €9 billion and require a security force of 45,000.
Breakdancing
The Summer Olympics traditionally feature a triathlon along with swimming, diving, cycling, fencing, wrestling, archery rowing, and soccer. This year, there are a total of 32 sports and 329 events for which 5,084 medals will be awarded. Breakdancing will debut on August 9, before the contests involving weightlifting, volleyball, rock climbing, table tennis and water polo. Organizers promote these games as the greenest in Olympic history and, for the first time, 30% of the menu offered to competitors and spectators will feature plant-based foods. “Games Wide Open” or Ouvrons Grand les Jeux is the slogan for the competitions to be held from July 26 through August 11, and followed by the Paralympics from August 28 to September 8.
Vive Les Phryges
Since 1968, there have always been cute mascots adopted by the host nation to symbolize the uniqueness of their Games. This year they are little, floppy, red Phryges (free-jee-us), cartoonish renditions of the caps that have been worn in France for hundreds of years, representing the ideal of freedom. The funny looking hat characters have not been given names but there are in fact two mascots; one is designed with a prosthetic leg for the Paralympics yet they share one motto: “Alone we go faster but together we go further.”
Fast and Furious
Here in the U.S. the news cycle has been fast and furious. On Sunday, the President, recovering from another bout of COVID, announced on Twitter/X that he was ending his campaign, offering no reason. A short time later, he endorsed the Vice President. In less than two days, Kamala Harris announced that she had collected enough votes from delegates to effectively secure the party’s nomination. In the meantime, Members of Congress, united in outrage over the lack of information on the security failures in Bethel, Pennsylvania that nearly resulted in the assassination of a former president, failed to extract anything useful from the head of the Secret Service, who appeared to testify before a House Committee only after a subpoena was issued. Pressure for her to be fired intensified; instead, she resigned within 24 hours. There are now calls for the ouster of her boss, the Homeland Security Secretary, who is busy naming an independent panel to conduct an investigation alongside the internal Secret Service probe, the official inquiry by the FBI, the panel being created by House Speaker, and the multiple congressional hearings underway. In the midst of this melee, Israeli prime minister Benjamin Netanyahu arrived to address a joint session of Congress hours before President Biden’s Oval Office prime-time speech. The same world that will be watching the Olympics cannot help but wonder about the status of American exceptionalism.
Wall Street Rally
This presidential election season has been a wild one and we can only imagine what may come next. Yet, despite the shocking appearance and performance of President Biden during the debate four weeks ago, questions about who is running the country, roughly ten thousand crossing the southern border every day, the release of a half dozen bombshell Supreme Court rulings, a Republican convention unified under a former president whose court trials have been upended, and everything else that has happened, most of Wall Street has been in rally mode. While monitoring developments — often wide-eyed — and opening their own wallets to support one candidate or the other, traders have pushed indices higher, focusing more on corporate earnings, Treasury auctions, next week’s Federal Reserve meeting, and events in China, Ukraine, Yemen and Israel. The Dow is up more than 3%, the S&P has risen 1.5%, the Nasdaq is 0.8% higher and the Russell 2000 has gained 9%. Gold is up 3% and Bitcoin is 8.8% higher. Among the major indicators, only oil prices, down 2.4%, have fallen.
Bond Market Rally
Treasuries set the stage for much of what happens in the global markets and the $69 billion 2-year note auction held on Tuesday was one of the strongest on record. Since the start of the month, the 2-year yield at 4.51% has fallen 24 basis points on the expectation that there will be a quarter point rate cut in September, followed by two more in November and December. The 10-year yield stands at 4.25%, lower by 14 basis points. The 30-year at 4.55% is down 8 basis points. The tax-exempt market has also rallied. The 2-year AAA general obligation bond yield at 2.85% is down 26 basis points in July. The 10-year at 2.78% reflects the inversion on the short end of the yield curve that has been the new normal since early December 2022; it has fallen 6 basis points this month. The 30-year muni benchmark yield at 3.66% is also 6 basis points lower.
Tax-Exempt Market
HJ Sims came to market last week to finance a $27 million non-rated Arkansas Development Finance Authority deal for the Academy of Math and Science in Little Rock. We structured the transaction with a single 2059 term bond that priced at 7.00% to yield 7.25%. Nonprofit borrowers have been rushing to take advantage of favorable conditions marked by lower yields, lower volatility, and relentless demand for yield from both retail and institutional buyers. Issuance so far this year exceeds $260 billion and is on a record pace. High yield muni indices are returning more than 5.5% this year and the underlying bonds are providing above average income. But across the credit spectrum, nonprofits are reaching out for help in accessing loans on favorable terms. Some have urgent needs. Others want to lock in rates ahead of the November elections. More than a few are worried about what the tax writers in Washington plan to do before the 2017 provisions expire, and if tax-exemption is on the table. There have been 13 straight weeks of inflows into high yield municipal funds and muni bond investors are flush with $163 billion of cash rolling between June 1 and August 31 from maturing bonds, called bonds, and interest payments. On top of that, there are $128.6 billion sitting in tax-exempt money market fund accounts and $96 billion parked in exchange traded funds. That adds up to $387 billion of cash and cash equivalents available for attractive new issues. Among he other new issues last week, Bayview Manor in Seattle came to market with a $13.2 million non-rated bond issue sold through Washington State Housing Finance Commission that featured a single term bond due in 2059 priced with a coupon of 6.00% to yield 5.90%. The Pines of Richfield in Minnesota sold $11.5 million of non-rated bonds that had a 2034 maturity priced at par to yield 5.25%.
Performance
Celine Dion will have a comeback performance in Paris this week. Unlike the Olympic athletes competing there, she will reportedly be paid $2 million, and that is to sing just one song. This, and a lot of things, seem really out of whack right now. At HJ Sims, we stand ready to listen to your concerns and help you stay on track to meet your goals in these unusual times – whether to lift the performance of your portfolio, or to help refine your financing options. Reach out to your HJ Sims representative this week. We agree with the Phryges in believing that “together we go further.”