By Gayl Mileszko
Market Commentary
November’s Muni High Yield Feast
For buyers of higher yielding municipal bonds this year, the weekly slates of negotiated offerings have brought either feast or famine. Now, with only three other full trading weeks left in 2025, we are seeing a veritable Thanksgiving parade of non-rated and below investment grade issues. Investors flush with cash in money market funds, or from portfolio realignments and redemptions, will be able to choose from a cornucopia of credits in senior living, education, health care, and other sectors. The table is being set for a grand feast to last through year-end, so be sure to your appetite.
Benchmarks Baked into Many Pricing Comparisons
Current taxable and tax-exempt bond benchmarks yields are as follows: the 2-year Treasury at 3.56% is flat on the month and 86 basis points below where it began the year; the 10-year at 4.10% is up 3 basis points in November but down 46 basis points in 2025; the 30-year at 4.72% has risen 7 basis points this month but is down 6 basis points year-to-date. The 2-year AAA general obligation municipal bond yield at 2.46% is flat so far this month and down 36 basis points YTD; the 10-year yield is 2.75, up 2 basis points in November but down 31 basis points since the start of the year; the 30-year yield at 4.14% is also flat this month but up 25 basis points in 2025.
Investors Savor the Muni Market
Municipal bond fundamentals remain sound for a variety of reasons including ongoing and backlogged capital needs, solid and steady demand from retail investors, low default rates, intermittent flights to quality during periods of volatility, and the many positive sector outlooks issued by credit rating agencies. LSEG Lipper reports municipal bond net inflows exceeding $23.9 billion this year, including $9.9 billion into the high yield funds that have been favored for much of the year. At the mid-month mark, benchmark index returns show Treasury returns at +5.88% while taxable munis are higher at +7.38%, and high yield munis up +2.87%. Our colleagues at Municipal Market Analytics report that municipal performance in November has been positive in 23 out of the last 34 years, including each of the past 7 years. December also generally reports seasonally strong performance driven by coupon reinvestments and tax-loss harvesting.
Lots of Nice Yield Ahead
One of America’s favorite holidays approaches, with all it has to offer – falling leaves, family gatherings, fabulous floats, food fit for a king, feisty football, and fights for sofa space. This week’s municipal calendar is stuffed with an array of yield-y offerings.
HJ Sims Learning Choice Academy Bonds – No Leftovers Expected
For charter school fans, HJ Sims is bringing a $20.6 million BBB-minus rated financing this week for The Learning Choice Academy. This is a TK-12 public hybrid charter school with 534 students in La Mesa, California, part of a 3-campus network founded in 2024, that plans to acquire and renovate the building that they have leased since 2019. For more information on this transaction, being issued by the state’s Municipal Finance Authority, please contact your HJ Sims representative.
Charter School and Senior Living Harvest
Among other charter schools, the South Carolina Jobs-Economic Development Authority is scheduled to sell $94.3 million of non-rated bonds for American Leadership Academy in Lexington. This K-12 school with 1,720 students opened in 2023 and is managed by Charter One. Funds will be used to acquire and improve the facilities, and fund working capital and certain capitalized interest. Among senior living deals, the Grand Rapids Economic Development Corporation has a $174.8 million non-rated issue for Michigan Christian Home better known as Beacon Hill at Eastgate. This Type B retirement community, opened in 1960, plans an expansion project including 101 independent living units and 40 assisted living units as well as major renovations to the skilled nursing building. In addition, the Columbus-Franklin County Finance Authority has a $28.5 million non-rated limited offering for Silver Birch of Columbus. Bonds are being issued to finance the construction of a new 120-unit rental assisted living community for those who meet the income eligibility requirements for multifamily properties financed with equity from the sale of low income housing tax credits.
Banquet of Yield
High yield buyers may also be interested in deals from other sectors on this week’s full plate. United Airlines brought $273.3 million of refunding bonds subject to the alternative minimum tax featuring 2038 term bonds that priced earlier this week with a coupon of 5.50% to yield 4.36%. The Economic Development Authority of American Samoa came to market with a $58.5 million Ba3 rated refunding and new money transaction. The Series A bonds due in 2035, exempt from federal as well as state and local income taxes, priced at 5.00% to yield 4.38%. The Powhatan County Economic Development Authority plans to issue $115 million of non-rated bonds for The Chesterfield hotel, a new 12-story Hilton hotel and conference center. Californians looking for tax-exempt community facilities district special tax bonds have several choices. And The Golden State Connect Authority has a $106 million non-rated telecommunications deal to finance a portion of constructing an open-access-fiber-to-the-premises broadband network for seven rural and underserved communities; capitalized interest is funded through December 1, 2028.
Setting the Table for This Week
This week’s trading session began with a small sigh of relief that the government finally re-opened after 43 days. Investors knew this was the inevitable outcome and found no winners in the sausage-making process. The Congressional Budget Office estimates that $7-$11 billion in economic activity will never be recovered. Ripple effects from the record-setting shutdown included lost jobs, travel disruptions, and delayed loans to small businesses, among others. It will take a while for returning federal workers to catch up on the backlog, and some economic data will be lost forever. The lack of routine governmental reports providing insight on jobs and inflation, however, has carved a lot of certainty out of futures trading and the prediction markets. Right now, the bet is 50/50 that there will be a cut in 3 weeks but maybe none until April.
Hunger Pains
Stock markets around the world awaited with bated breath the earnings report and outlook from the only company with a $4.3 trillion market cap: Nvidia. Volatility in the artificial intelligence sector has moved investor sentiment well into the “extreme fear” category. Markets are hungry for forward guidance, very concerned about valuations and the sustainability of AI growth as well as broader economic issues. On top of that we have crosstalk from dozens of Fed officials; any hawkish remarks tend to rattle markets that have longed for a December cut. Also contributing to the daily volatility is the fact that much market activity stems from momentum and algorithmic trading that reacts within milliseconds to news headlines. Given the 24/7 global news cycle, there is never a quiet moment.
Mashed Outlooks
Last week some investors had some stuffing knocked out of them as a result of Iran’s seizing of an oil tanker, the USS Gerald R. Ford aircraft carrier’s arrival within striking distance of Venezuela, the latest tariff news, China’s announcement of a massive gold deposit, and talk in D.C. of 50-year and portable mortgages. This week, we focus on the results of 8 Treasury auctions, comments from 19 Fed speakers, the sanctions scheduled to be imposed on Russian oil, and the announcement of the steps being taken to dismantle the Department of Education and hand off employees and duties to other agencies. There are countless other moving parts to track: the September jobs report finally coming out on Thursday, major retailer earnings announcements, the Bill Ackman plan to rescue Fannie Mae and Freddie Mac, the Cloudfare outage, the huge bitcoin slide, Poland scrambling jets, the Saudi crown prince’s $1 trillion investment promise and, yes, the retirement of the U.S. penny after 232 years, actually causing some Main Street retailers to offer gift cards with double value if customers bring in the spare change under their couch cushions and car seats.
Dressing Down the Worries, Squashing Some Risk
Millions seem obsessed with the release of the Epstein files, but no one seems too concerned at this point about potential loss of demand for U.S. Treasuries and the dollar. Worries over a major stock market correction have driven millions into some of the most liquid of assets, so money market fund assets have climbed to $7.5 trillion. U.S. ETF assets exceeding $13 trillion are at a record high. Some smaller savers are excited over the prospect of a $2,000 tariff gravy check next year but, given our nation’s staggering debt and deficit, many others do not want to see a repeat of the pandemic stimulus that drove inflation to 9.1% and knocked the stuffing out of many consumers and small businesses.
Finance Pilgrims
HJ Sims takes great pride in being a pioneer, a pilgrim, in the senior living and long-term care financing world, having brought our first tax-exempt senior living bond in 1965. We have since raised approximately $30 billion for non-profit and for-profit projects across the country. For more than two decades we have also financed start-ups, acquisitions and expansions that have made many dreams come true for charter school students, their families and sponsors. Our banking team also works with higher education, hospital, student housing, and other borrowers to advise and partner on, structure, and execute financings tailored to meet their specific needs. And our trading and sales teams work to introduce and support these credits within the $4.3 trillion muni market that is clearly growing alongside infrastructure needs for seniors housing and care and top quality schools. Contact us for more information on how we can help you to borrow and invest in these key sectors.
Harvest Home
Back in the fall of 1621 in Plimoth, Massachusetts, there was a bountiful harvest after a year of sickness and scarcity. Pilgrims celebrated a tradition called the Harvest Home. Massasoit, a leader of the Wampanoag People, along with 90 of his men joined the English for three days of entertainment and feasting. No one knew what the coming days, months or years would bring. Four hundred and four years later, we are still unsure of what the future has in store for us. But we are grateful to all those who supply this year’s harvest, and we count our many blessings. To all our valued staff, loyal clients, industry colleagues, and all in communities, schools, and hospitals that we have been privileged to finance, we at HJ Sims wish you safe travels and a very happy Thanksgiving.