By Gayl Mileszko
Market Commentary
Magic in the Old and New
There is magic in the old, and magic in the new; the trick is to successfully combine the two, suggests inspirational author Adrienne Posey. Here, we take a quick look at some of the old and new events that live alongside us, starting with a few of the very old moments that have shaped our American history. This year, New York City commemorates the 400th anniversary of its founding by the Dutch. We mark the 250th anniversary of the War of Independence, the founding of the Navy, the Army, the Marine Corps, and the Postal Service. It is the centennial of the Grand Ole Opry and The Great Gatsby. The Social Security Act was signed into law 90 years ago. It has been 80 years since the end of World War II and 50 years since the Vietnam War officially ended. What an edge-of-the-seat moment it was when, 25 years ago, the outcome of a presidential election was decided by the Supreme Court. And, last year saw the nation elect a president to two nonconsecutive terms for only the second time in history. Mr. Trump continues to knock down a significant number of old policies and practices, and he produces a host of new ones — almost daily.
What’s New?
A long hot summer came to a close on Monday and this week means the start of a new year for many schools. Several situations for traders are not exactly new: the Fed Funds rate is basically at its highest since 2007, a president is pressuring the central bank for a major rate cut, the U.S. is involved to some extent in several wars, and the Congress needs to act urgently to prevent a government shutdown by October 1. Main Street and Wall Street continue to operate in a landscape that can only be described as highly uncertain. Gold prices are at all-time highs as some buyers reach for this old haven amid worries over the value of U.S. currency and Treasuries. But, in less than 30 days, we will start a new federal fiscal year and new Supreme Court term. A national housing emergency may be declared for the first time. The Secretary of the Treasury is rolling out the list of “no tax on tips” jobs. There have been about 383 new legal challenges filed against the Trump administration’s executive actions and the most contentious are lining up for appeal to the nine robed justices sitting right behind the U.S. Capitol. The Supreme Court — or the Congress — will likely have to resolve a number of cases involving tariffs, the causes for which a president may fire a Federal Reserve Governor, birthright citizenship, rights of illegal immigrants and asylum seekers, deportations, and pocket rescissions. Some rulings may be issued on an expedited basis, as requested. Decisions or delays are never easy to forecast but there are plenty of global prediction market sites collecting wagers.
Somethings New, Somethings Old
Investors are feeling quite confident that our central bank will decide on the first new rate cut since last fall. But one eye is kept on the economic data upon which the Federal Open Market Committee relies. Second quarter gross domestic product growth was revised upward to an annual rate of +3.3% from +3.0%. The July core personal consumption expenditures price index came in line with expectations. New home sales, durable goods orders, consumer confidence, consumer expectations, continuing claims, and wholesale inventories all beat expectations. But the number of job openings has dropped and nonfarm payroll data coming out on Friday is expected to be in the low 75,000 range, mirroring the July data. Hopefully it will not include more downward revisions of prior month data. Another eye is closely following developments overseas, where the Shanghai Cooperation Organization Summit is underway, and the nasty trio of Xi, Putin, and Kim are putting on a show of solidarity at a massive military parade featuring nuclear missiles in Beijing.
New Trends, Yields and Ratios
In the first half of 2025, 469 new exchange traded funds launched. Morningstar now calculates that there are now more publicly traded ETFs (over 4,300) than individual stocks (around 4,200). In the municipal bond market, year-to-date ETF inflows are now over $20 billion, more than double that of the $8 billion that has gone into municipal bond mutual funds. Seven new muni ETFs launched in August, bringing the eight-month total to 25. There are now 131 muni ETFs with $159 billion of assets under management, according to CreditSights. At this writing, the 2-year AAA municipal general obligation bond benchmark yield is 2.21%, the 10-year is 3.23% and the 30-year is 4.62%. The two-year muni-Treasury ratio is 60%, the 10-year 75% and the 30-year 93%. The University of Chicago Center for Municipal Finance Muni VIX indicator of implied future volatility stands at 0.047, down from a high of 0.20 on April 7; a reading greater than 0.15 suggests relatively high near-term muni market volatility.
New Issuance, Attractive Yields, and Positive Returns in August
August municipal volume was $48.5 billion, bringing the year-to-date total to $386.7 billion, on track for another record-shattering year. In spite of the uncertainty over economic data, conflict resolution, tariffs, inflation, interest rates, and numerous judicial actions, borrowers of every size and credit quality came to market and met with good reception given that $57.9 billion of principal and interest hit bondholder accounts during the month and another $21.2 billion was paid out on September 1. Muni indices posted positive returns across the board in August; however, most tax-exempts still have negative year-to-date returns. This matters little to buy-and-hold investors and crossover buyers thrilled with current yields and paying no attention to fluctuating monthly third-party evaluations. Non-rated munis have 1.25% paper losses, while long-dated munis, 22 years and out, are down 3.73%. Taxable munis, with returns of +4.74%, are outperforming Treasury counterparts in 2025 on paper, but underperforming investment grade corporate bonds at +5.46%.
Charter and Private School Issuance in August
Last month, we saw one North Carolina private school and seven charter schools in Florida, North Carolina, South Carolina, Texas and Nevada come to market with a combined par of $469,560,000. The slate included our $94.4 million Ba1 rated deal for Renaissance Charter School. These financings reflected the wide array of academic programs made available to charter school students: college preparation, the classics, language immersion, dual enrollment, technology, sports, STEAM, and health profession training. Two deals were non-rated, four were below investment grade and two were high grade. The average final maturity was 31 years and ranged from 7 to 40 with coupons between 5.00% and 6.625% priced with discounts to yield between 5.23% and 6.75%. The majority were offered exclusively to accredited investors and qualified institutional buyers. So far in 2025, 76 charter and private school financings with combined par of $3.4 billion of have been sold, and HJ Sims has been proud to assist 15 schools access the market for a total of $840.9 million for start-up, expansion and improvement projects.
Senior Living Issuance in August
In the senior living sector, we saw six financings with combined par of $469.4 million come to market in August. This included our $80 million non-rated sale for Sunrise of Long Beach in California, along with issues for projects in Florida, Nebraska, Kansas, and Indiana. Bond proceeds paid for pre-construction costs, new construction, and improvements. Five of these deals were non-rated and had final maturities ranging from 2027 to 2065. Coupons ranged from 4.25% to 11.50% and three deals were priced at discounts of $96.358 to $98.718. So far in 2025 we have seen 42 nonprofit senior living and care bond issues totaling $3.73 billion. HJ Sims has underwritten over $1 billion, and we have financed the largest number of non-rated start-ups this year.
Good Magic in September
We can use all the good magic we can get this month as we come to the end of the third quarter. Municipal Market Analytics reminds us that, since 2014, the muni market in September has incurred losses that have often exceeded 1% as reinvestment dollars decline while the two-month September/October period historically sees the largest issuance of the year. At HJ Sims, we do indeed have a fantastic pipeline of financings in the works. During these first few days of September, we also note that secondary market trading is also active with both retail and institutional buyers attracted to current yields, diverse credits, and good liquidity. This week, we are sponsoring and speaking at the AJAS CFO Summit in Aurora Colorado. We encourage all readers of all ages to participate in National Read a Book Day on September 6. Note that Sunday marks the beginning of National Assisted Living Week; this year’s theme is “Ageless Adventure”. The annual Fall Conference of the National Investment Center for Seniors Housing & Care (NIC) takes place in Austin from September 8 to 10, and we look forward to seeing many of you there. Please reach out for more information from our banking, trading sales, and analytic teams.