H2C INSIGHTS as of March 16, 2020
Rates and Economic News
From March 6 to March 13, 10-year and 30-year MMD rates increased by 75 bps and 86 bps, while 10-year and 30-year Treasury rates increased by 20 bps and 31 bps, respectively. As of March 13, the 30-year MMD rate is 149 percent of the 30-year Treasury rate. According to Lipper, for the seven-day period ending March 11, municipal bond funds recorded $1.76 billion in net outflows, the second consecutive week of outflows.
SIFMA increased 3 bps to 1.28 percent, while tax-free municipal money-market fund assets decreased by $164 million to total net assets of $134.5 billion for the seven-day period ending March 11.
On March 9, 10-year and 30-year U.S. Treasury yields dropped to all-time lows once again, settling at 0.54 percent and 0.99 percent, respectively. Additionally, 10-year and 30-year MMD yields also reached all-time lows on March 9, settling at 0.78 percent and 1.38 percent, respectively. The fall in interest rates was catalyzed by the turmoil surrounding the global spread of the novel coronavirus (COVID-19) as well as Saudi Arabia’s announcement on Sun., March 8, that it was going to flood the market with crude oil as a result of a disagreement with Russia over oil production cuts. As a result, the DJIA declined 2,014 points, a decline of almost 8 percent, and investors rushed to safer assets, driving both U.S. tax-exempt and taxable yields lower. Due to the volatility and absolute low levels of interest rates, credit spreads widened significantly, with investment-grade corporate credit spreads peaking on Friday at 216 bps from 96 bps just 30 days prior.
On March 15, the Federal Reserve cut the Fed Funds rate by 100 basis points to 0.00-0.25 percent, following a 50 basis point cut just 12 days prior, while simultaneously announcing a $700 billion quantitative easing program. In a press conference following the rate cut, Federal Reserve Chairman Jerome Powell said, "We will maintain the rate at this level until we're confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals." Most market participants interpreted the statement to mean that the rate cut would not be immediately reversed once coronavirus numbers start to taper, but rather the Fed would be watching for signs of economic recovery.
This week, H2C published State of the Capital Markets, a brief overview of the volatility created in the markets the past few weeks. The article features proactive strategies health systems should keep in mind during this time of financial distress.
TriHealth (NR/A+/AA-), Cincinnati, Ohio, is planning to price a total of $202.5 million in bonds consisting of $107.7 million in tax-exempt, fixed-rate bonds (Series 2020A) and $94.7 million in tax-exempt put bonds (Series 2020B). The bonds will be used to fund new projects and to refund prior debt. (See TriHealth POS.)
Recent Rating Actions
The Washington Hospital (PA): Affirmed Baa2; Outlook negative
Prisma Health (SC): Downgraded from A2 to A3; Outlook negative
Geisinger Health System (PA): Affirmed Aa3; Outlook revised to “negative” from stable
Memorial Health System (IL): Affirmed A1; Outlook stable
Butler Health System (PA): Downgraded from Baa1 to Baa2; Outlook negative
Capital Region Medical Center (MO): Affirmed Baa2; Outlook stable
Catholic Health System (NY): Downgraded from Baa1 to Baa2; Outlook negative
Stanford Health Care (CA): Assigned Aa3; Outlook stable
Wood County Hospital (OH): Downgraded from Ba2 to Ba3; Outlook revised to “negative” from stable
Norton Healthcare (KY): Assigned A; Outlook stable
TriHealth (OH): Assigned A+; Outlook stable
Children’s Hospital Colorado (CO): Affirmed A+; Outlook revised to “positive” from stable
Stanford Health Care (CA): Affirmed AA-; Outlook stable
Mount Nittany Medical Center (PA): Affirmed AA-; Outlook stable
TriHealth (OH): Assigned AA-; Outlook stable
Rush Obligated Group (IL): Affirmed AA-; Outlook stable
Stanford Health Care (CA): Affirmed AA; Outlook stable
Hammond Hanlon Camp LLC (“H2C”) is an independent, healthcare-focused strategic advisory and investment banking firm with a particular emphasis on the not-for-profit sector. The firm’s principals have been lead advisors on hundreds of transactions in the healthcare industry representing billions of dollars in value, offering the experience and industry knowledge to achieve the most favorable results.
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CAPITAL MARKETS UPDATE
MMD YIELD CURVE • Current vs. 1 Year Ago
UST YIELD CURVE • Current vs. 1 Year Ago
INTEREST RATE SNAPSHOT
Source: Bond Buyer, Bloomberg and MMD – Thomson Reuters Municipal Market Data as of March 13, 2020.
(1) Rates as of March 11, 2020.
For additional information, please contact Elaine Yao (firstname.lastname@example.org or 212 257 4509) or Phil Kaplan (email@example.com or 312 508 4212). The information presented herein was obtained from resources believed to be reliable and accurate, but Hammond Hanlon Camp LLC does not guaranty the accuracy or completeness, or assume a responsibility for any loss which may result from the action by any person upon such information. Such information is subject to change without notice and is not intended as a recommendation, offer, or solicitation with the respect to the purchase or sale of any security.