HJ Sims Market Commentary: Piano Concerto for the Left Hand

by Gayl Mileszko

Paul Wittgenstein was one of eight children born into a wealthy Vienna family in 1887. His parents frequently welcomed into their warm parlor some of the world’s most prominent composers: Johannes Brahms, Gustav Mahler, Richard Strauss. Their fourth son studied music with a blind tutor and several virtuosos, eventually making his public debut on the piano at age 26 to critical acclaim. But less than a year later, he was one of hundreds of thousands of Austrians called up for military service in what would become known as World War I. He served as a second lieutenant in the 6th Dragoon regiment of the Austro-Hungarian army on the Eastern Front in what is now proud Polish land. En route to the Battle of Galicia in August of 1914, Paul was shot in the right elbow, captured by the Russians, and shipped off to a prisoner of war camp in Omsk, Siberia where he recovered after having his shattered right arm amputated. He was one of more than 21 million people wounded in the Great War, later cited for bravery but nevertheless convinced at the time that his whole world with all its dreams for a life of music had ended. Paul’s story, like many others — then and now — is one of survival and determination.   

While imprisoned, Paul Wittgenstein resolved to continue with his passion, and so he practiced for long hours on a keyboard drawn in charcoal on a crate, hammering the phantom keys with his left hand. In 1915, he was released as part of a prisoner exchange. He continued to practice for about seven hours a day and eventually made a one-handed debut back on stage in December 1916. He spent his next decades in freedom, eventually commissioning 17 piano concertos from composers regarded as the very best in the world. Wittgenstein performed one of the most well-known pieces written for one-handed piano by Maurice Ravel with the Vienna Symphony Orchestra in 1932. He paved the way for many other disabled pianists, including Siegfried Rapp who lost his right arm on the Russian front in World War II, and lived out the rest of his life in upstate New York with his wife Hilde, offering piano lessons to those who could not afford to pay.

At this writing, yet another war rages in central and eastern Europe. Technically, the Russian invasion of Ukraine is in its 14th day, but the conflict has raged since at least 2014. The world looks on, as victims, heroes, and villains are being named in real time in forms of media that could never have been contemplated a century ago. The war has shaken global citizenry as well rattled our financial markets in words and ways not expressed in decades. In the third year of a world-wide pandemic, world leaders have denounced Vladimir Putin’s invasion and subsequent actions and imposed a series of increasingly stringent sanctions. Adverse effects have been immediately felt.

The Russian ruble is now worth less than one cent and trading on the Moscow Exchange has been halted since February 28. Russia’s ability to cover foreign debt service is decreasing, and there is new speculation that the country might default on bonds as early as April 15. McDonald’s, for example, is one company shuttering its operations in Russia, affecting 847 restaurants and 62,000 employees. Around the world, commodity prices have skyrocketed. At more than $4.17 a gallon, gas prices in the U.S. are at an all-time high as Brent crude, the benchmark for oil, has risen to more than $129 a barrel. Nickel prices have quadrupled in just a few days to more than $100,000 per metric ton. Traders know that the rich soils of Russia and Ukraine produce 29% of global wheat exports, 19% of corn and 80% of sunflower supplies, so futures are reaching record highs. Fertilizer prices are up as much as 98 percent from a year ago, impacting plans for planting crops in Kossuth County, Iowa, Mato Grosso, Brazil, and Jilin, China. Threats to supply cuts, spiking prices, and hoarding, have farmers, consumers, and investors around the world concerned. Growth expectations are being downgraded and there is renewed talk of recession. And, while many are alarmed by the behavior of the leader of a country encompassing more than one-eighth of the Earth’s inhabited land area, on the other hand just as many understand that we need to remain watchful of developments in China, North Korea, Iran, Syria and elsewhere.

In the Markets

Since the invasion on February 24, the VIX Fear Index has risen 16% to 35.13. Haven trades have included the dollar, gold, real estate, consumer staples, and even the Chinese yuan. The Nasdaq is down 5 percent, the S&P 500 Index is off 118 points or 2.8%, and the Dow and Russell 2000 indices have each lost 1.7%. Gold prices at $2,030 an ounce are up 5.5% and silver at $26.20 is up over 6%. Bitcoin has gained 9 percent. Amid all the volatility and despite soaring inflation, cash has suddenly regained attraction, as have ultra short-term funds.

U.S. Treasuries have been volatile, with yields moving as much as 15 basis points within a single trading session. Since the invasion began, the 2-year yield has risen 2 basis points to 1.59%, the 10-year has fallen 12 basis points to 1.84% and the 30-year is down 5 basis points to 2.22%. The difference in yield between the 2- and 10-year maturities has narrowed to 25 basis points from 78 at the start of the year. While U.S. municipal bonds are generally viewed as safe havens, yields are up across the board in the last two weeks. The 2-year AAA general obligation benchmark yield at 1.14% is up 9 basis points while the 10-year at 1.71% has risen 14 basis points and the 30-year at 2.13% is 19 basis points higher. The difference in yield between the 2- and 10-year tax-exempt maturities has narrowed to 57 basis points from 79 at the end of 2021.

Market Perception

Currently, markets perceive signs of progress towards a ceasefire and risk assets have begun to rally again. It may be merely wishful thinking at this point, but the world has a hope chest full of dreams and determination after several years of devastation wrought by the coronavirus variants.  In the U.S. alone, COVID has infected 79.4 million, and is said to have become the third leading cause of death, responsible for the loss of more than 961,000.

With all the disruption and uncertainty abounding, it is hard to imagine any for-profit or non-profit entity braving market entry with new issues of equity or debt. In fact, the IPO market has been very quiet and the corporate high yield market is basically on hold, with only $9.3 billion of total primary market sales in February and $2.1 billion so far this month. On the other hand, this week’s corporate investment grade calendar totals nearly $40 billion including an 11-part, 30-year deal for AT&T and Discovery, after a nearly $60 billion slate last week.

In the Municipal Market

Recently in the municipal market, HJ Sims brought a $55.6 million BB+ rated forward settlement financing for Morningside Ministries in San Antonio through the New Hope Cultural Education Facilities Finance Corporation in Texas. We sold the deal on February 24 for delivery in October with term bonds in 2027, 2032, 2037, 2042, 2047 and final maturities in 2057 priced with a 5% coupon to yield 4.48% and a 4.25% coupon priced to yield 4.63%. Among other recent senior living deals, the City of Manhattan, Kansas came with a $22.8 million BB+ rated financing on March 2 that had a 2052 final maturity priced with a 4.00% coupon to yield 3.68%, and the Wisconsin Public Finance Authority sold $41.7 million of A-rated bonds for Linden Ponds in Hingham, Massachusetts on February 24; the 3.13% maximum yield bonds due in 30 year bore a 4% coupon. In the charter school sector in the last three weeks, we saw twelve deals including $19.6 million for Doral Academy in Westminster, Colorado which came with a non-rated transaction due in six years that priced at par to yield 4.50%. Kestrel Heights Charter School in Durham, North Carolina had an $18.9 million non-rated deal through the Wisconsin PFA with a single forty-year maturity priced at 6.25% to yield 6.719%. Early Light Academy in South Jordan, Utah brought a $7.8 million BB rated financing structured with 2050 term bonds priced at par to yield 4.25%. And the Imhotep Institute in Philadelphia had a non-rated refunding due in 30 years that priced with a 6.75% coupon to yield 6.99%.

March has historically represented the month of greatest volatility for municipal bonds, but we at HJ Sims have assisted banking and investing clients in every market condition prevailing since 1935. We summarized our recent history with hundreds of industry colleagues who gathered at our 19th annual conference for three days last week in Orlando, and will be sharing highlights in coming weeks for those who were unable to attend. In the meantime, our investment banking and sales teams invite your calls and questions. We listen carefully to your concerns about portfolio compositions, market movements, and financial instruments and work hard in concert with our trading, underwriting, analytic teams to provide you with a guiding hand and our best sound advice.

For more information on our municipal offerings or questions about current market conditions, please contact your HJ Sims representative.

Exclusive Opportunities For Our Clients