Market Commentary: What has three legs, is 800 pounds and flies to Mars?

Published November 27, 2018

The three-legged, 800-pound NASA InSight spacecraft touched down on Mars on Monday after a six month, 300 million mile journey. This marked the eighth successful landing on the Red Planet, each one a U.S. engineering marvel. The InSight (Interior Exploration using Seismic Investigations, Geodesy and Heat Transport) stationary lander cost us taxpayers $1 billion and is designed to study heat and quakes in the deep interior of Mars over the next two years. The Curiosity Rover which we funded landed in 2012 is still operating 370 miles away. Other craft launched this year are on seven year missions to Mercury and the sun.

Back on Earth, we have been focusing on less astral events. The holidays. Oil prices dropping to $50 a barrel. The economic slowdown in China and recent reversal in Germany. The 2019 deficit target for Italy. Wildfires in California. Blizzard conditions in the Midwest. The General Motors layoffs. Federal Reserve speakers. Tensions and tear gas on the southern border. The 40% drop in the price of Bitcoin. The 5% decline in the Nasdaq.

Stock indices registered their worst pre-Thanksgiving performance in seven years and erased all their gains for the year. When the closing bell rang on Friday, the Dow had fallen 829 points on the month, the S&P 500 dropped 79 points, and the Nasdaq 366 points. Bond yields tumbled as investors shunned the risk and volatility in equities. The 2-year Treasury yield closed at 2.80%, down 6 basis points in November. The 10-year finished at 3.03%, down 11 basis points, and the 30-year ended at 3.30%, down 9 basis points. Municipal bonds mirrored the strength in governments. The 2-year AAA general obligation yield dropped 6 basis points to 2.01%, the 10-year fell 12 basis points to 2.61% and the 30-year ended 11 basis points lower at 3.27%.

New muni issuance totaled $6.9 billion in the last two weeks and muni bond fund withdrawals exceeded $2.5 billion. In the charter school sector, we saw a lot of activity. The Maricopa County Industrial Development Authority sold $72.3 million of Ba2 rated revenue bonds for Benjamin Franklin Charter School structured with 2052 term bonds priced at 6.00% to yield 5.55%. The Arizona Industrial Development Authority brought $35 million of non-rated bonds for Pinecrest Academy of Nevada featuring a 2053 maturity priced at 6.15% to yield 6.17%. The Jefferson Parish Economic Development and Port District issued $44.8 million of non-rated revenue bonds for Kenner Discovery Health Sciences Academy including 30-year term bonds priced at 5.625% to yield 5.71%. The California School Finance Authority issued $33.7 million of non-rated charter school revenue bonds for Equitas Academy structured with a 2056 maturity priced at 5.00% to yield 4.98%. The Public Finance Authority of Wisconsin sold $14.8 million of non-rated bonds for Union Day School that came with thirty year term bonds priced at par to yield 6.75%. And the New Jersey Economic Development Authority had an $11 million non-rated issue for Golden Door Charter School including 2052 term bonds priced at 6.50% to yield 5.77%.

In the senior living sector, the Health and Educational Facilities Authority of Missouri came to market with a $29.3 million BBB-minus rated financing for Christian Horizons that had 2040 term bonds priced at 5.00% to yield 4.75%. The South Carolina Jobs-Economic Development Authority issued $6.7 million of non-rated term bonds due in 2048 for Woodbridge Clinton that were priced at par to yield 7.00%. Montgomery County, Maryland sold $13.4 million of non-rated bonds for the Village at Rockville which included 30-year term bonds priced at par to yield 6.50%. The Cumberland County Municipal Authority brought an $8.1 million BBB-minus rated financing for Messiah Village that had 2035 term bonds priced at 5.00% to yield 4.48%. The Arizona Industrial Development Authority placed $5.5 million of non-rated 12% subordinate debt due in 2023 for Windsong Senior Living. And the California Municipal Finance Authority placed $14.7 million of non-rated taxable 7.00% bonds due in 2053 for Welbrook Woodland Hills.

The last week of November is jam-packed. European Union officials approved a take-it-or-leave-it draft Brexit agreement that Theresa May is pitching to the UK Parliament. The Ukraine has declared martial law after Russia seized three of its naval ships and 23 crew members in the Black Sea. The 13th meeting of the G20 will be held in Buenos Aires, Argentina. Twenty new governors are preparing transition plans. Holiday shoppers are burning up the ‘net; online sales on Black Friday were up 23% over last year and Cyber Monday was reportedly the largest in history at $7.9 billion.

This week’s municipal calendar is expected to total $7 billion. HJ Sims is in the market with a $51.4 million non-rated Palm Beach County financing for Tuscan Gardens of Delray Beach. And the Chicago Board of Education has a $763 million general obligation refunding issue rated B+. At this writing, the 30-day visible supply of municipal bonds totals $9.1 billion.

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