By Gayl Mileszko
The Roaring Twenties
Back in the Roaring ‘20s of the twentieth century, four U.S. presidents held office: Woodrow Wilson, Warren Harding, Calvin Coolidge and Herbert Hoover. So far in the Roaring 20’s of the twenty-first century, there have been two, and the most recent one was twice elected. This week, presidential history repeated. Donald J. Trump, like Grover Cleveland before him, is serving a non-consecutive term. At 78, he and Joe Biden hold the record for being the oldest men sworn into office. And he, like Ronald Reagan before him, was forced by freezing cold temperatures to hold his inauguration in the Rotunda beneath the Capitol Dome. So far, that is where all similarities end. He is, quite simply, one of a kind. Dubbed “Mogul” by the Secret Service, he has managed to survive two impeachments and assassination attempts, multiple efforts to keep him off ballots, bankrupt him, and imprison him. This week, he is wasting no time in exercising the powers of the presidency and capturing an unmatched share of media attention.
Whirlwind
President Trump has an extraordinarily ambitious agenda and is surrounded this time by what appears to be a loyal team. Shortly after taking the oath of office, he signed dozens of executive actions, orders, memoranda, pardons and proclamations prepared in advance by his staff to make good on campaign promises. Main Street and Wall Street were braced for rapid action, but have been left breathless by this human whirlwind. At JP Morgan, the largest U.S. bank, a team of analysts pulled an all-nighter in a “war room” created to comb through the first wave of executive actions and seize initiative with investment strategies on oil, AI, crypto, the dollar, shipping, and other sectors. Among the pronouncements of interest are the declaration of a national energy emergency, a regulatory freeze, the crypto task force, and orders to explore ways to lower the cost of housing and expand supply. Expectations for aggressive pro-business actions fueling an economic boom produced rallies in stocks and bonds for a month post-election and again now post-inauguration. Fears over tariffs have been temporarily set aside while the issues are studied, but many are scratching their heads over what is to become of Greenland and the Panama Canal.
The First 100 Hours
Much attention is paid to the first 100 days of any administration. This time, investors will have to stay alert through the first 100 hours. Although in much the same way as the Federal Reserve telegraphs its likely next actions, Mr. Trump and his spokespeople have clearly broadcast their plans ahead of taking office. Markets applaud the America-first “revolution of common sense” agenda but loathe the uncertainty associated with speedy disruptions. The flurry of activity in the White House at the outset creates concern that there is not enough time to read and digest the details. Those opposed to various policy proposals are quick to label them inflationary, just about the worst tag that can be given these days. But there are enough natural hurdles to any kind of government reform; these, for example, come in the form of razor-thin congressional support, confirmation delays, higher interest costs on Treasury borrowing, heavyweight lobbyists, the mind-numbing steps needed to cut red tape, costly natural disasters, and unexpected geopolitical flare-ups.
100 Days
On Friday, Republicans on the House Budget Committee released a compilation of options for achieving savings based on input from a dozen other committees. The Ways and Means Committee laid out the savings associated with eliminating tax-exemption on interest of municipal bonds issued by state and local governments ($250 billion over 10 years), and private activity and “non-municipal” bonds ($114 billion. There is a 51-page report on potential targets for the reconciliation bills(s). The Government Finance Officers Association and Bond Dealers Association are organizing visits to member offices to help educate — or refresh the memories of — legislators and staff. The municipal bond lobby is armed with powerful figures of their own. The impact of eliminating the exclusion of interest is estimated to increase borrowing costs by $1.9 trillion over 10 years. To bring the impact closer to home, it is projected that every taxpaying household would be hit with a $6,664 increase in taxes and rates. All those in the municipal bonds community are encouraged to become involved in the defense of tax-exemption directly as well as through their associations. The GFOA’s Washington representative urges us not to delay: “We need to act right now like we have 100 days to save the tax exemption.” For more information on how to most effective way to roar when communicating your views, reach out to your HJ Sims representative.
January Bond Yields and Returns
At this writing, the 2-year AAA municipal general obligation bond benchmark yield is 2.41% while the 2-year Treasury bill yields 4.27%. The 10-year muni yield stands at 2.53%, and the comparable Treasury yield is 4.57%. The top rated 30-year muni yields 3.46% and the long bond yield is 4.80%. While just about every asset class saw gains last week, bond indices are still reporting small negative returns month to date. Investment grade munis are down 0.45% while high yield tax-exempts have lost about 0.11%. Taxable munis are a tad above breakeven while Treasuries and investment grade corporate bonds are a tad below. High yield corporates, which have seen only about $7 billion of issuance so far in 2025, are up 0.86%.
Latest Tax-Exempt Financings
Last week, HJ Sims was in the market co-managing the $87 million non-rated California Municipal Finance Authority for the Ascent 613 student housing financing in San Diego. The final maturity in 2060 was priced with a coupon of 5.50% to yield 5.53%. This week’s municipal calendar is expected to total $14 billion, led by a $2 billion University of California refunding. Featured on the slate is a $32.5 million non-rated California School Finance Authority issue for Sycamore Creek Community Charter School and a $28.3 million BBB rated refunding for Noble Network of Charter Schools. Egan, Minnesota plans a $17.5 million non-rated limited offering for Great Oaks Academy. The California Public Finance Authority has a $121 million non-rated limited offering for Sunrise of Manhattan Beach. These financings are just some of the latest examples of the essential public purpose projects made possible by tax-exempt financing for our students and seniors.
112 Years of History in Building America
Our nation’s debt and deficit situation is well-known, and those working to address the challenges are all well intentioned. We wish them every success in setting and funding true priorities, making the government more efficient, and eliminating the waste and fraud we all know are pervasive in our $7.5 trillion budget. But it is our sincere hope that the new Administration and the new Congress will continue to recognize the importance of the tax-exempt market, as they have since 1913, to more than 50,000 municipal borrowers as well as the many taxpayers in most every bracket who invest in bonds that have built the majority of American infrastructure and supported programs of such great benefit to every community.