Market Commentary: Rage and Honor

Published October 16, 2019

The Philadelphia Flyers played their first home game of the season last Wednesday and beat the New Jersey Devils 4-0. Home ice is at the Wells Fargo Center, a multi-purpose arena on South Broad Street in South Philly formerly known as Spectrum II. The facility is owned by Comcast Spectacor, which also owns the Flyers, and is capable of accommodating 21,500 fans, concert goers or political conventioneers. It just underwent a four-year renovation costing $265 million. Among its newest features are a 90,000 pound 4K kinetic scoreboard and a room with concrete walls behind a trap door in the Assembly Lounge on the City Terrace Level. Now dubbed the Disassembly Room, it is the first “rage room” in a major professional sports venue. Fans may make reservations, pay $35 apiece or $60 for groups of two, and don a helmet and protective gear for a private 5-minute session to smash, crush and otherwise demolish breakable items including TVs, furniture, dishes, guitars, computer screens and opposing team logos using hockey sticks, baseball bats, and sledgehammers. There is also an observation deck so that family and friends can watch the whole stress-relieving, fan engagement experience.

Rage rooms are said to have originated in Japan but the concept has spread around the world and there are now hundreds of such locales in peaceful cities including Charlotte, Austin, Daytona Beach and Glen Burnie, Maryland. No doubt there are many of us who would like to have a similar space in our own homes or offices right adjacent to the screen where we watch the streaming news all day long and cannot help but react to the wild swings in the markets brought about by algorithmic trading, central bankers talking Fed-speak, any given politician at a media scrum, neighborhood small business bankruptcies, injustices in the courtroom, pro athletes and entertainers opining on matters outside the scope of their expertise, and yes, even beloved teams robbed of hard-earned victories by shoddy officiating.

Bondbuyers might benefit from time thumping some inanimate objects after last week’s sell-off. Risk markets were buoyed last week over leaked prospects for a trade deal with China and some new optimism over a possible Brexit accord. The 2-year Treasury yield increased 19 basis points to 1.59%, the 10-year rose by 20 basis points to 1.72% and the 30-year added 18 basis points to finish the week at 2.19%. Municipals suffered in the latest exit from safe havens, but not as badly. The 2-year AAA general obligation benchmark in fact strengthened by one basis point to yield 1.10% while the 10-year yield jumped 8 basis points to 1.40% and the 30-year rose 9 basis points to close at 2.00%. Investors added $1.4 billion to municipal bond mutual funds last week, and $528 million of the total flowed into high yield funds. The $6.7 billion municipal slate included a $45.9 million North Carolina Medical Care Commission refunding for Galloway Ridge at Fearrington in Pittsboro. HJ Sims served as a co-manager on the non-rated financing structured with a 20 year maturity priced at 5.00% to yield 3.00%. Among other deals in the high yield sector, the Public Finance Authority issued $38.6 million of Baa3 rated taxable capital appreciation bonds due in 2027 for Statler Hilton and Dallas Central Library and $33.6 million of non-rated revenue bonds for the Las Vegas Monorail structured with 30 year term bonds priced at 6.625% to yield 7.034%. The Industrial Development Authority of Tempe, Arizona sold $33.4 million of non-rated senior living revenue bonds for Friendship Village that included a 2054 maturity priced at 5.00% to yield 3.68%. And the State of Ohio came to market with a $26.8 million revenue bond transaction for BBB-minus rated Tiffin University that featured a 30-year term bond priced at 4.00% to yield 3.74%

There will be talk this week at the Democratic debates in Westerville, Ohio, at congressional hearings on The Hill, in the Oval Office and at the political rally in Lake Charles, Louisiana and in the House of Commons in debate on the Queen’s Speech. Fed speakers include James Bullard, Esther George, Mary Daly, Charles Evans, Lael Brainard, Michelle Bowman, John Williams, Rob Kaplan and Richard Clarida. Corporate earnings for the third quarter will spur conversations as will the latest International Monetary Fund World Economic Outlook, the Fed Beige Book, and data releases on retail sales, residential construction and industrial production.

Municipal buyers expect about $12.4 billion of issuance, primarily comprised of taxable bonds. In the tax-exempt sector, there is a $100.8 million BBB-minus rated refunding for Florida Institute of Technology, the California School Finance Authority is bringing a $29 million non-rated deal for Real Journey Academies, and the Danbury Higher Education Authority has a $27.5 million BBB-minus rated transaction for Golden Rule Schools. The New Jersey Economic Development Authority is in the market with a $27.5 million non-rated revenue bond issue for the Black Horse Egg Harbor Township Renewal Project, and a $12 million non-rated financing for Friends of Vineland Public Charter School. The Development Authority of Cobb County, Georgia has a $21 million non-rated refunding for Presbyterian Village Austell, and the City of Chatfield, Minnesota is selling $13.3 million of non-rated bonds for Chosen Valley Care Center.

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