Fixed Income Market Insights

We have been discussing Charter Schools for quite some time regarding the credit quality of the underlying.  Bondholders who own MUNI debt sold for a TX charter school did not receive their October coupon payment after the school closed its doors.  Reve Preparatory...

The municipal bond market is on track for a record year of issuance which could surpass $500 billion by year-end.

Fed Reserve Bank of SF President Mary Daly indicated further rate cuts are likely needed, but the US central bank should approach those cuts with caution.

• Chicago is lending cash to its underfunded pensions so they have enough money to avoid asset sales to cover retirement checks as they wait for property taxes to come in after a computer issue delayed collections.

• Connecticut is collecting a duo of fiscal wins this week with two upgrades from both Moody’s and Fitch. Both of the credit rating agencies cited improvements in the state’s budget management practices.

• As mentioned in a previous note, we have several economic data points being released BEFORE the FED meeting this month. One of which is the Non-Farm Payrolls, Bloomberg is expecting a larger gain in August’s numbers than in July.

• Articles are surfacing about the unprecedented and escalating attacks on the FED from President Trump. The attacks could backfire by hitting financial markets and the economy with higher long-term borrowing costs.

With Jackson Hole this week, we are seeing a lot of news regarding the FED. Most FED officials highlighted inflation risks as outweighing concerns over the labor market at their meeting last month.

• Brightline, the private rail line linking Orlando to Miami, refinanced $985M of junior debt at a record-high 14.89% yield, reflecting deep investor concern after delaying a July interest payment on $1.2B in munis.

Fed Officials Signal Possible September Rate Cut Amid Labor Softness: Three Fed policymakers — Daly (SF), Cook (Board), and Kashkari (Minneapolis) — expressed concern about a slowing labor market, citing weak July job gains and downward revisions to previous months.

This is a busy week for US debt issuance as the Treasury auctions off 3-, 10- & 30-year bonds and a heavy load of short-term bills.

As we know, the FED held rates steady on 7/30, Powell said interest rates are in the right place to manage continued uncertainty around tariffs and inflation tampering expectations for a rate cut in September.