Weekly Market Update

2018 Q2 MARKS RECORD LEVELS OF HOUSEHOLD DEBT

Thursday, August 16, 2018

Despite rising interest rates, household borrowing reached a record $13.3 trillion as of the end of the second quarter, surpassing debt levels reached prior to the 2008 financial crisis. While mortgages comprise most household debt, auto loans and student loans have seen significant increases over the past five years. During the past quarter, lenders originated $151 billion in new auto loans, the most in one quarter in 13 years, and outstanding mortgages reached $9 trillion, the highest level since 2009. Despite the increase in borrowing, delinquency and foreclosure rates decreased slightly over the past several quarters. The Federal Reserve has gradually increased rates since 2013, with the benchmark rate currently ranging between 1.75-2%.

In Other News

  • The U. S. Department of Education announced its intent to rescind the gainful-employment rule which would have punished career-oriented institutions whose graduates perform poorly in the job market. ED instead wants to require all colleges to report the earnings of their graduates to better educate potential applicants, but many worry that the data, which may not be available until late 2019--at the earliest--will not accurately represent graduates' compensation.
  • Arizona State University has partnered with the National World War II Museum in New Orleans to offer the first ever graduate degree in World War II history. The courses will be online and will begin this coming January.
  • Connecticut's public college and university system is anticipating major budget deficits in the next several years, reflecting the state's ongoing fiscal challenges. The increasing cost of retirement benefits is the main driver of the deficit.
  • Some of the top women's colleges are experiencing significant increases in enrollment following the 2016 presidential election. Schools such as Barnard College, Bryn Mawr College, and Mount Holyoke College have seen large increases in both number of applications received and accepted offers.
  • The Board of Trustees of The University of Akron unanimously agreed to cut about 20% of the university's degrees and degree tracks. At the same time, the board decided to invest more heavily in programs such as cybersecurity and chemical sciences.
  • The University of Chicago is currently in a legal battle with the Pearson Foundation, which pledged $100 million to the university to build a global center for peacemaking. The foundation claims the university has not met its obligations and is demanding that the school return the funds.

Rating Agency Update

  • Moody's and S&P assigned Aa2 and AA-, respectively to University of Florida's Series 2018 Parking Bonds. The outlook is stable.
  • Moody's affirmed University of North Carolina Hospitals' Aa3 rating. The outlook is stable.
  • Moody's downgraded Montclair State University's rating from A1 to A2. The outlook is revised from negative to stable.
  • Moody's assigned Aaa to Purdue University's Series 2018DD Student Fee Bonds. The outlook is stable.
  • Moody's assigned Aa1 and S&P assigned AA+ to the University of Pittsburgh's Series 2018 PANTHERS notes. The outlook is stable.
  • S&P affirmed Virginia Polytechnic Institute & State University's AA rating. The outlook is stable.
  • S&P assigned A- to Manchester University's Series 2018 Revenue Bonds. The outlook is stable.
  • S&P's affirmed its AA long-term rating on Carnegie Mellon University's outstanding debt. The outlook is stable.