By Gayl Mileszko
Market Commentary
Play Ball!
The late great Ted Williams, baseball legend and veteran of two wars, once quipped that baseball is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer. So far in the Major League baseball postseason, 17 batters can boast of averages over .300. Four will be competing in the first game of the World Series on Friday. In the championship series last year, the Dodgers beat the Yankees in five games. This year, the Dodgers are back and ready to face off against the Blue Jays. Tens of millions who love America’s Pastime will tune in to see the 31 year-old Los Angeles superstar Shohei Ohtani, wondering if it is possible for him to surpass his performance in the final game of the National League playoffs. In one of the greatest athletic feats of all time, he pitched six scoreless innings with 10 strikeouts and hit three home runs. The pressure is on. It is said that, for players as well as fans, baseball is just one big nervous breakdown divided into nine innings.
Say It Ain’t Over
For baseball fans, it is also noted that there are only two seasons: winter and baseball. For investors, there will soon be just one open season. Several services already offer extended hours, but the industry is moving toward round-the-clock trading. For those who relish the chance to immediately react to breaking news around the world as it happens, this will be a welcome development. We have some doubts about what our batting average would be at 3 a.m. Nevertheless, we expect that the majority of action, at least in the municipal bond world, will still take place during what we consider to be normal hours in New York.
What Is Normal Anymore?
We are in the final quarter of the year and have not seen very much that can be categorized as normal in 2025. The partisans in the House and Senate are not playing ball well together. Nearly every bill enacted passes by the slimmest of margins and not many have passed. The White House has been rolling out one or more major initiatives nearly every day at all hours. DOGE. Deportations. Tariffs. Lawsuits. Rescissions. De-Regulation. Peace agreements. National Guard troops. Layoffs. In the process of enacting the One Big Beautiful Bill, a serious threat to municipal bond tax exemption arose, only to be thwarted by an unprecedented lobbying effort. Now we are on Day 23 of a government shutdown. Only the designated few hitters are manning their desks, committed but unpaid for now. There will be an event of some sort that will bring parties to the table in the middle of a night to negotiate a deal, most likely next month. In the meantime, the Supreme Court justices are still hearing cases and they may welcome for the first time in history a sitting president in their courtroom. SCOTUS will indeed have a most exciting term, being asked to rule on several constitutional issues for the first time in nearly 250 years.
Seventh Inning Stretch?
With the exception of one or two days in April when tariffs were announced, markets have been astonishingly calm. Stocks and bonds have frequently rallied and paused in tandem. At present, we seem to be in a flight to quality on trade jitters. At this writing, the 2-year Treasury yield is 3.44%, the 10-year at 3.95% and the 30-year at 4.53%. The 2-year municipal general obligation bond benchmark yield stands at 2.39%, the 10-year at 2.72% and the 30-year at 4.11%. The major Wall Street banks are touting the value of munis and the higher yields available now — ahead of the FOMC rate decision next week. Futures trading reflects the expectation for quarter point cuts at each of the next two meetings, followed by additional reductions in January, June and September next year. We see compelling arguments for some investors to lock in longer-term yields, and for borrowers to take advantage of the steady demand. Contact your HJ Sims representative for guidance.
Crowd Pleasers
There are still only six trading days left in the month and only 9 trading weeks left in the year, some shortened by major holidays. This month, we have seen positive price momentum, solid primary distribution, and good net fund flows. It appears that munis will report positive October returns, possibly the best showing since October 2009. Issuance at $30.9 billion so far this month has come in below estimates, but historical data shows that supply will peak in the next two weeks. Some analysts believe that a huge number of borrowers pushed their sales into the early months of 2025, hoping to be grandfathered into any deals on exemption hammered out between Treasury officials and the tax-writing congressional committees. Others see that the uncertain environment dictates that they hold off until next year. We understand the many worries but have dismissed most over the past 10 months, finding exceptional demand from a diverse array of buyers, good liquidity, attractive yields and solid performance – particularly in the senior living sector which has seen 17 straight quarters of growth.
Muni Scoreboard From Last Week
Last week saw $11.8 billion of muni bond issuance. We saw the Libertas Woodruff school issue $33.8 million of non-rated bonds through the South Carolina Jobs Economic Development Authority; bonds maturing in 2065 priced at par with a coupon of 7.25%. Voyage Academy sold $17 million of Aa2 rate enhanced bonds through the Utah Charter School Finance Authority; the final maturity in 2060 priced at par to yield 5.00%. Kenosha School of Technology Enhanced Curriculum brought a $17.9 million non-rated financing via the Wisconsin Health and Educational Facilities Authority structured with a 2060 term bond priced at par to yield 7.25%. In the senior living sector, The Ulster County Capital Corporation in New York issued $32.3 million of non-rated bonds for Woodland Pond at New Paltz that had a 2059 maturity priced at 5.875% to yield 5.95%.
Peak Season Schedule
This week is a great one for sports fans. In addition to the start of the World Series, the NBA regular season begins and we have football, hockey and soccer. In the municipal arena, we anticipate close to $17 billion in municipal bond issuance led by at least four billion-dollar sales. Two charter schools and as many as 5 senior living deals are scheduled to price. Markets are closely following the sometimes delicate sometimes heavy-handed negotiations with China, this time involving rare earths and soybeans. Last week’s fears over credit exposure in regional banks have largely dissipated, so eyes turn to the 8 Treasury auctions, CPI data coming out Friday, and third quarter earnings reports from major firms including Netflix and Tesla. Investors will also receive economic data from the Conference Board, Mortgage Bankers Association, Chicago Fed, Kansas City Fed, University of Michigan, and National Association of Realtors. Contact your HJ Sims representative for our lineup of offerings, seasonal picks and outlooks.