by Gayl Mileszko
Traders treaded water early last week while awaiting the announcement from the Federal Open Market Committee and the Chairman’s press conference. Then, exactly as expected, the central bank announced plans to reduce its monthly bond purchases by $15 billion in November and December and, economic conditions permitting, continue to taper through June of 2022 when net new purchases of government and mortgage-backed bonds would cease. The announcement was one of the most well-telegraphed in Fed history so investors were reassured that the Fed is proceeding cautiously in the direction of normalization, that no rate hikes are currently planned until July at the earliest, and that the inflation ravaging every pocket of commerce is still expected to be transitory, subsiding when various bottlenecks ease. In response, everything but oil and bitcoin – facing separate headwinds – rallied.
Stocks at All-Time Highs, Bond Yields Fall Across the Curve
The VIX volatility index reflected calm as good news continued to roll in with a better than expected jobs report and Pfizer’s promising interim data on the experimental COVID-19 pill. Stocks hit another set of all-time highs. The Dow gained 508 points, the S&P 500 rose 2 percent, the Nasdaq was up over 3 percent, and the Russell 2000 more than 6 percent during the first trading week of November. Gold prices increased by 2 percent to $1,818 an ounce and silver rose by 1 percent to $24.16. Oil fell by $2.30 per barrel to $81.27 after OPEC and its allies announced plans to raise output by 400,000 barrels per day and U.S. crude inventories increased. Bitcoin prices dropped $1,591 or 2.5% as trading volume declined and federal tax and reporting issues surfaced. Bonds yields fell across the curve. The 2-year Treasury closed at 0.40%, down 9 basis points on the week. The 10-year dropped by 10 basis points to 1.45% and the 30-year finished at 1.88%, down 5 basis points. The 10-year Baa corporate bond yield at 3.12% fell 8 basis points as did the 10-year AAA general obligation municipal bond benchmark yield which closed at 1.13%. The top-rated 30-year muni yield finished the week at 1.88%, down 5 basis points right alongside Treasuries.
Corporate Bond Sales
Corporate earnings reports confirmed that issues with supply chains and inflationary pressures persist but that fundamentals appear strong. Borrowers were rewarded with solid receptions and low rates. In the investment grade space, Public Storage brought a $1.75 billion debt offering in three parts and the 10-year senior unsecured bonds had a 2.25% coupon priced to yield 2.253%. Among high yield sales, trading firm Jane Street Group became the 86th inaugural borrower of the year; its Ba2 rated debut issue came with $600 million of eight-year secured notes that priced at par to yield 4.50%.
HJ Sims in the Market with Financings for Loomis Communities and Wesley Woods
The $11 billion new issue municipal calendar includes two senior living deals that we at HJ Sims are bringing to market. We have a $19.5 million BBB rated financing through the Massachusetts Development Finance Agency for Loomis Village in South Hadley and Applewood in Amherst; $13.7 million of the bonds are structured for forward delivery in October of 2022. Our $15 million BB+ rated transaction for the life plan community Wesley Woods of Newnan is being issued through the Residential Care Facilities for the Elderly Authority of Coweta County, Georgia. Please contact your HJ Sims representative for more details on these communities and our offerings.
Weekly Municipal Market Recap: HJ Sims $125 Million Refunding for Sinai Residences
Primary market volume last week totaled $7.6 billion and HJ Sims had the largest senior housing financing on the calendar. We underwrote $125.3 million of non-rated Palm Beach County Health Facilities Authority revenue refunding bonds for the Toby & Leon Cooperman Sinai Residences at Boca Raton in Florida. The transaction was structured for forward delivery in March of 2022 and had five term bonds, including a 2056 maturity that priced with a coupon of 4.25% to yield 3.875%. Among other senior living financings, the Chester County Health and Education Facilities Authority in Pennsylvania sold $39.4 million of non-rated revenue bonds for Simpson Senior Services and its five senior living communities, including a 2051 maturity priced at 4.00% to yield 3.73%. The South Carolina Jobs-Economic Development Authority sold $36.7 million of revenue refunding bonds for Lakewood Senior Living in Boiling Springs and Lakeside Place Senior Living in Lexington with a 35-year maturity priced at par to yield 4.625%. The Public Finance Authority had a $49.4 million BBB rated refunding for The United Methodist Retirement Homes and its three continuing care retirement communities that featured 2051 term bonds priced at 4.00% to yield 2.76%.
Investors are waiting for the next chapter in Washington after the House passed the Senate’s infrastructure bill last week. Attention turns to the battle over the multi-trillion reconciliation package and the clock: only 23 days remain until government funding runs out and spending approaches the debt ceiling. We are past the peak of corporate earnings reports but a major focus will be on the seven Treasury auctions and economic data releases with details on inflation, inventories, jobless claims, job openings, and consumer sentiment. Bond markets will close on Thursday in observance of Veterans Day. On this 103rd anniversary of the end of World War I, we at HJ Sims honor and thank all military veterans who have served in the U.S. armed forces and willingly sacrificed so much to defend our precious freedoms.
For more information on value and yield in the current market environment, as well as on investing in long term care, please contact your HJ Sims representative.