Weekly Market Update

WALL CONSTRUCTION COULD LEAD TO U.S. DEFAULT

Thursday, August 24, 2017

Speaking at a recent rally, Donald Trump threatened a government shutdown unless funding for a new wall on the southern U.S. border is included in the upcoming spending bill. To complicate matters, Congress will need to raise the debt ceiling at the same time that the spending measure is due, September 30th. Congress could package the increase in the debt limit with the new spending measure; however, Trump has threatened to veto the bill if it does not include funding for the wall. If the debt ceiling is not increased, the U.S. risks defaulting on its debt payments due at the beginning of October. Investors have already priced in this added risk: treasury bills maturing in October yield more than those due in November.

In Other News

  • Due to enrollment and revenue problems, Cincinnati State Technical and Community College has canceled the seasons of four varsity sports teams this year, retaining only men's and women's soccer for 2017-18.
  • Shared gifting, where nonprofits provide grants to other nonprofits, has increased in recent years. The process can increase collaboration as well as provide funding to nonprofits that traditional donors may overlook.
  • State aid to Connecticut's municipalities and school funding will be cut unless the government can pass a budget by October. The state's financial woes, which have resulted in outsized debt levels, may bankrupt its cities, including the capital, Hartford.
  • Universities are missing out on low-income, high-achieving students. These students account for only 3% of enrollment at elite colleges, according to a new report. In order to increase enrollment from this group, the report suggests that universities can simplify costly and confusing admissions processes, among other tactics.
  • Financial deregulation could lead to significant profit increases for the largest U.S. banks. In one proposed change, municipal bonds would be included in the easy-to-sell assets category, along with cash and mortgage-backed securities.
  • Moody's released FY 2016 medians for not-for-profit and public healthcare. According to the report, annual expense growth increased more than annual revenue growth contributing to compressed balance sheet ratios.

Rating Agency Update

  • Moody's downgraded University of Alaska's rating to A1 from Aa3. The outlook is stable.
  • Moody's assigned A2 to Saint John's University's (MN) Series 2017 Bonds. The outlook is stable.
  • Moody's affirmed Creighton University's A2 rating. The outlook is revised to positive from stable.
  • Moody's assigned Aa2 to Iowa State University Facility Corporation's Series 2017 Revenue Bonds and Aa3 to Series 2017 Athletic Facilities Revenue Refunding Bonds. The outlook is stable.
  • S&P affirmed University of Dayton's A+ rating. The outlook is stable.
  • S&P affirmed University of Scranton's A- rating. The outlook is stable.
  • S&P downgraded University of Louisville Foundation's rating to A+ from AA-. The outlook is negative.
  • S&P affirmed Georgia Tech Facilities Inc.'s AA- rating. The outlook is stable.
  • S&P affirmed Wildlife Conservation Society's AA- rating. The outlook is stable.
  • S&P affirmed Earlham College's A rating. The outlook is stable.
  • S&P affirmed Purdue University's AAA rating. The outlook is stable.