JAPAN
Following significant global market turmoil on the heels of the Bank of Japan (BOJ)’s hawkish raise, Deputy Governor Uchida stated that the BOJ would not raise rates while markets are unstable. After Uchida’s remarks the yen returned to last week’s levels and Treasury yields and equity prices partially recovered as well.
Our Take: While some of Monday’s market turmoil was a continued response to softening U.S. data, a large part was also likely due to highly leveraged investors who were borrowing in yen having to unwind trades as the yen rallied. Between Uchida’s remarks and completion of the most urgent carry trade unwinding, markets have settled down from earlier in the week.
MUNICIPALS
Naples, Florida issued capital improvement revenue bonds this week. Some of the proceeds from the $21 million issuance will be used to rebuild the Naples Pier, which was significantly damaged by Hurricane Ian in 2022. The total cost of the rebuild is expected to reach over $26 million, with $11 million coming from the municipal bond issuance, $7 million from FEMA, $5 million from a state grant, $2.2 million from county tourist taxes, and $1.4 million from donations. Naples has replaced its pier on four other occasions since 1910, according to Bloomberg. In addition, in 2015 the city renovated the pier at a cost of $2.7 million. City officials have indicated that the rebuilt pier will be stronger, with deeper pilings.
Our Take: Recovering from storms, floods and fires can be fiscally challenging for state and local governments. Rebuilding can carry a large price tag. Municipalities are tapping the bond market to access funding for storm and natural disaster-related infrastructure projects. In this case, the highly rated revenue bonds issued to fund the Naples Pier project are backed by appropriations from the city along with revenue generated from beach parking.