By Gayl Mileszko
Market Commentary
Trotting Out the Turkeys
Sadly, Thanksgiving is over. But turkeys still abound. We have scoured the 2025 landscape and picked out a few of the most foolish, clumsy and out-of-touch birds in the barn. Their squawking, clucking, and feather flapping will not soon be forgotten.
Cold Turkey
The Turkey of the Year Award goes to the staff of the House Ways and Means Committee for floating a proposal to eliminate the municipal bond tax exemption to offset a major portion of the cost of the One Big Beautiful Bill. Fortunately, the industry quickly rallied to squash the effort, inundating Members of Congress with examples of essential projects built — and being built — by bonds in each district. A close runner-up was the entire 119th Congress, for failing to fund the government for 43 days, costing our economy $11 billion and undermining global confidence in U.S. governance.
Roasting the Fed
We cannot help but also single out our central bankers for their delays in cutting interest rates. There were no grounds for all the name-calling, but we attribute much of the market volatility, suppressed consumer demand, stalled housing activity, plunging consumer confidence, delayed capital investment, and amplified recession fears to the FOMC voters. They continue to cling to stale data of questionable quality and outdated playbooks and have expanded their role far beyond their dual mandate.
Stuffing Up Badly
Unquestionably, the top turkey honor in the business category goes to the CEO of Cracker Barrel who approved and pushed for a redesign of its iconic logo, underestimating the appeal of nostalgic Americana to its customer base and causing the stock price to drop $94 million in a single day.
Side Dishes
There are so many other turkey award winners this year: the New York City mayor-elect for his zany grocery store, free transit, minimum wage, rent freeze, and tax hike campaign proposals, the Canadian prime minister for escalating tariff tensions, the viral social media producing the Labubu craze, those buying celebrity meme coins and betting good money in one of the new prediction markets on whether or not the government will confirm that aliens exist. We also have blue ribbons for the rapper who started that “6-7” meme, the one who prompted Elon Musk to brandish a chainsaw in visual tribute to DOGE government spending cuts, the brain trust behind the Bitcoin Strategic Reserve idea, and the PR team who orchestrated the 11-minute Blue Origin suborbital flight theatrics with Katy Perry.
Also on the Platter
This year’s nominees also included the 2025 Super Bowl halftime show producers, the advertisers promoting buy-now-pay-later, anyone who thinks they can save a few bucks by lying on a mortgage application, the Supreme Court clerk who drafted the cosmic blunder rhetoric for one Supreme Court Justice and the Justice who took a pass on voting on the Oklahoma religious charter school case, leaving a major constitutional issue unresolved. You can name dozens more. On a more positive note, we plan to give out some gold star awards in the coming weeks and welcome all contributions.
A Month Covered “in a cobbler crust of brown sugar and cinnamon”
November was another positive one for municipal bonds, the fourth month in a row; a sweet one well described with Sarah Adison Allen’s metaphor. The ICE BofAML Index for high yield municipal bonds reported returns of 0.40% in August, 2.66% in September, and 1.13% in October. The + 0.32% returns in November came primarily from the coupon rather than the price component. Having recently brought new deals to market in the education and senior living sectors, we know firsthand that retail and institutional accounts both supplied good demand, particularly in the case of higher yielding muni bonds. Overall volume last month exceeded $42 billion, bringing the year-to-date total to a new record high of about $567 billion, according to MSRB data. LSEG Lipper reported net municipal bond fund inflows at $1.44 billion, with two weeks of data skewed by an open-end California mutual fund that converted into an ETF within the same fund family. These conversions are happening more regularly, underscoring the huge growth in muni ETFs of late. Municipal Exchange Traded Funds are on track for a record-setting year with more than $33.8 billion of net inflows. CreditSights data show that there are now 157 separate muni ETFs with assets exceeding $183 billion. They also report that there are 488 muni mutual funds with $832 billion under management. Last year at this time, there were 523 muni mutual funds with $699 billion of AUM and only 85 ETFs holding $120 billion of assets.
Yields Fall in November
Readers may be familiar with something called the Terror Management Theory which contends that most human action is taken to ignore, forestall, or avoid the anxiety-producing terror of our inevitable death. The financial markets seem to have adopted a Washington Management Theory: traders create anxiety by clinging to every word uttered by Federal Reserve officials but try to fend off other anxieties by ignoring most of the drama and rhetoric emanating from the executive, legislative and judicial branches in D.C. But all too often we cannot help but pay attention to the goings-on in the nation’s capital. Such was the case with the longest government shutdown on record when travel was disrupted, and there was a huge data void, vexing the venerable Fed at its October 28-29 monetary policy meeting and confusing most investors for more than six weeks. During the October shutdown month, Treasuries in fact rallied: the 2-year yield fell 3 basis points, and the 10- and 30-year yields dropped 8 basis points. Muni buyers looked for yields out longer and saw some major swings. The 2-year AAA general obligation bond yield climbed 16 basis points but the 10-year fell 18 basis points and the 30-year benchmark ended lower by 7 basis points. By November’s end, the 20-year Treasury yield fell 9 another basis points to 3.48%. The 10-year declined by 6 basis points to 4.01%. And the 30-year ended fairly flat at 4.66%. Muni yields ended November with almost no change: the 2-year fell 2 basis points to 2.44%, the 10-year rose 2 basis points to 2.75%, and the 30-year at 4.16% closed higher by 1 basis point.
Pulling at the Wishbone, Hoping for A Rate Cut
Despite a dearth of government data, investors could not and still cannot ignore recent signs of a weakening labor market and sinking consumer confidence. However, this has raised market expectations for a December rate cut. At this writing, future trading reflects an 89% expectation for a 25 basis point Fed reduction in the target rate at the December 10 meeting, with two more quarter point cuts projected to come next April and July. Regardless of the timing of the next cuts, nonprofit borrowers continue to tap the market to meet refinancing, expansion, and other capital needs. This year so far we have seen 109 charter and private school financings issue a total of $4.4 billion in combined par, of which $459 million came in October and $258 million in November. In the senior living sector, there have been 80 transactions for a total par of $6.81 billion, including $873.3 million in October and $1.33 billion in November. The student housing market has witnessed 34 student housing bond deals in 2025 for a combined par of $4.05 billion, $586 million of which came in the last two months. We expect an exciting conclusion to the year and a big start to 2026 in each of these key municipal sectors.
Setting the Table for Year-End
Setting the turkeys aside for now, we set the table for December where only two full trading weeks remain. This week kicks off a month of wonderful holidays, the last FOMC meeting of the year, some portfolio repositioning and last-minute tax loss harvesting. The Congress has plenty of issues to address but faces no urgent deadlines until next month. The White House continues to dominate headlines with new initiatives rolling out almost daily. Wall Street is monitoring earnings reports and guidance from the big retail giants, this week’s six Treasury auctions. Private sector payrolls in November just fell again – with our small businesses taking the brunt of the hit. For now, the spotlight is off inflation, which continues to rise but within expectations, and many consumers remain oblivious during this mad shopping season. There is also plenty more to draw attention away from holiday spending and the economy: Taiwan, Venezuela, Russia-Ukraine, the Putin trip to India to talk about oil purchases needed to fuel its war effort, the crypto selloff underway since mid-November, the drug war we are waging, speculation on the name and timing of the announcement of the next Fed chair, and the legal issues surrounding the announced nullifications of the former president’s autopen-signed executive orders. Whew.
Make Every Day a Day of Thanksgiving
A gravy train arrived on December 1 when muni bond investors saw $30 billion of principal and interest payments hit their accounts; they will welcome another $16 billion later this month and look for the most appetizing offerings in the primary and secondary markets through year end. Projections are for another $35 billion of volume this month, and for another record-setting year of issuance in 2026 with estimates running as high as $750 billion due to higher construction costs, federal grant cutbacks, and delayed capital projects. Your HJ Sims representatives stand by to assist with credit reviews, investment guidance, bids-wanted and yield-y offerings, board updates, refunding and new money financing options, and much, much more. We are grateful for your interest and your business and hope to continue to make you thankful for our guidance.