- Columbia reached a landmark deal with the Trump administration to restore federal funding for research, easing a crisis that has rattled the school’s faculty and undermined its leadership. The college will pay $200 million in penalties over three years to resolve multiple civil rights investigations, clearing the way for over $400 million in federal funding that was previously cancelled. This is excellent news for this college and hopefully sets a precedent for others to follow. We have been reporting on higher education papers for the last several months. We would encourage buyers to proceed with caution unless a strong underlying basis or insurance is provided by one of the companies we trade with.
- A 135-year-old downtown Chicago arts college had its credit rating downgraded to junk, the latest small school to see its finances bruised by declining enrollment. This downgrade will limit management’s ability to stabilize operations and borrow additional capital at a reasonable cost.
- Staying with the college theme, the State Department has launched an investigation into Harvard University’s participation in a program for foreign researchers and visitors. This continues to escalate the Trump administration’s campaign to hamstring the schools’ finances and the ability to enroll international students. As of now, there should be no danger of issues regarding their bonds; however, should this continue to escalate, it will be obvious that downgrades are forthcoming from the rating agencies.
- Bond traders are increasing bets that the Fed will cut rates more aggressively next year, as speculation mounts over a potential change in leadership within the Fed. With the constant pressure on the Fed by President Trump, one might question how much longer Powell will tolerate it. We anticipate a minimum of one cut, and possibly two, this year. Should the rhetoric continue, we could see multiple cuts in 2026.
- As we have reported, Bessent indicated there is “no rush” to identify a successor to Powell. There are many strong candidates, and the nominee could potentially come from within the existing board as well. I suspect Powell will remain at his post for the balance of his term next year, but the markets continue to remain volatile as this ongoing discussion mounts.
- Many, including me, are being asked by both prospects, clients, and friends, “Who is paying for the tariffs?” Currently, it appears that American businesses and consumers are being affected, with a notable example being GM, which indicated this week that it will be “raising costs” due to the levies impacting the company’s profits by more than $1 billion. Currently, this explains why car prices did not rise in last week’s inflation data, as manufacturers appear to be absorbing the costs.
- President Trump indicated that he is considering a proposal to eliminate capital gains taxes on home sales; however, in the same breath, he noted that the “same thing would happen” if rates were to decrease as well. No capital gains taxes on home sales would be a benefit to many; however, it would not significantly impact the fixed-income markets. Nevertheless, it would be an interesting attribute to add to the tax code.
- As reported, the MUNI market faced renewed pressure last week as rising longer-term yields were a cause of (one of some) heavier issuance, which outpaced investor demand. Shorter-term paper did drop in yield; the longer to mid-range paper reacted negatively regarding pricing. I suspect we will continue to see this heavy demand in the near term, which will likely put pricing pressures on the MUNI markets. Oddly, the corporate markets are holding up well, thanks to the strength in the equity markets.
- Milton Friedman once said, “Inflation is always and everywhere a monetary phenomenon.” As we have reported for many months, tariffs are shaping up to be, almost “everywhere” and perhaps a “disinflationary” force as they are cooling demand. Currently, with the tariff talk (and in place), it is pushing energy pricing down and lifting most currencies against the dollar, which makes imports cheaper. Overall, all numbers point to lower inflation, and I suspect the FED will comment on this at the next meeting this month.
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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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