- As investors brace for mounting financial strains on hospitals and healthcare systems amid estimates that legislation could push millions of Americans off their health insurance. We have been sounding the alarm bells for this structure for over five months, due to the $ 3.4 trillion tax and spending package, which includes cuts to Medicaid. If you are buying uninsured paper and/or small regionals, be aware of what you own.
- Bostic indicated he still supports holding rates steady and pointed to recent inflation data showing price pressures are rising. Bostic told Fox Business, “Right now I would wait” on any rate moves. This does not come as a surprise. What will be more interesting is the feud between Trump and Powell; it will be interesting to see how that plays out. Over my 30+ year career, I cannot remember a time when the FED chair and the president were at odds to this degree.
- Reports that President Trump wants to “fire” Powell have set markets in a tizzy, with long-term yields and inflation expectations surging. Equities and the dollar also fell in response to this news. These moves either partially or fully retraced after Trump quickly said an attempt to dismiss Powell, claiming he (Powell) has not eased policy enough. Many believe Trump is testing the markets to “see if he can fire Powell.” The sharp reaction in all markets appears to have convinced President Trump to back away from these words for now.
- US wholesale inflation moderated in June as a sharp decline in the costs of travel-related services blunted a pickup in goods pricing. PPI remained unchanged, and CPI remained flat. All in all, the numbers are steady, but, as we have discussed, tariffs need to be addressed. We do not see a rate cut over the next couple of months.
- We have been reporting on Charter Schools and Community Colleges for several weeks. Moody’s Rating Service downgraded Ohio’s Terra State Community College issuer and revenue bonds by one step to Caa1, citing the school’s inability to balance operations. We have been flashing the warning flag on debt like this for a while. If you’re unsure about what you own, please call us to discuss.
- Airport debt remains substantial, with an issuance of over $10 billion in the first six months of 2025, the largest first-half total since 1990. The surge of issuance marks a 51% increase over the previous year. We have been bullish on this credit; however, most of this debt is issued as AMT paper, which we tend to avoid for tax reasons.
- Federal Reserve Bank of Boston Susan Collins indicated she continues to believe the US central bank can be “patient” in considering any rate cuts. This should not come as a surprise, as we have been reporting this for several weeks. We do, however, have a “divided” FED. As long as Powell remains the chair, we suspect we will not see any cuts for the next few months. We, however, continue to believe that we will see one or two this year.
- As previously mentioned, we have been reporting on higher education paper for about 7 months. Harvard University warned that the combined cost of federal actions against the school, including a recently passed tax increase, could approach $1B annually. The University has announced a hiring freeze and will cut expenditures for the next several months to address the increased costs. We do not expect this to significantly impact the University’s credit rating; however, we would not be surprised to see a downgrade in the future.
- CPI numbers are printed as of the morning of 7/15, and came in at 2.7%. Underlying US inflation rose in June by less than expected for the fifth consecutive month, driven down by car prices. This report will raise questions about how broadly President Trump’s tariffs will impact consumer pricing. Some companies continue to shield customers by stocking up on inventories ahead of the levies or absorbing part of the increased costs.
- JPM’s latest client Treasury Survey indicated investors’ net long positions shrank to the smallest in the past six weeks. That coincides with the selling pressure we are seeing in US Government debt, which increased on 7/15, after the June consumer price data failed to alleviate concerns over the impact of trade levies. In response, traders, including us, trimmed positions in the Treasury markets.
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Yield to call (YTC) is not indicative of total return; this yield is valid only if the security is called. Bonds may or may not be called, or be callable on multiple dates or, in other cases, called any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at anytime without notice.
Do not buy bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the claims paying ability of the insurance company.
Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower rated bonds, carry a greater potential risk of default & should be considered by sophisticated investors only.
This document is for informational purposes only and does not replace or serve as a substitute for your official monthly statement generated by NFS. Please refer to your official statement for accurate and comprehensive account details.
Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. NewEdge Securities, LLC. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule, please consult with your tax advisor for further clarification.
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