Tuesday Dec. 9, 2014

Corporate Bond Market
All eyes on equities this morning as global stocks decline taking the credit markets with them. DJIA Fut -106, S&P Fut -12.8, the IG23 index +1½ after a tough day yesterday at 65½/66.  Market feels spooked by a Wall Street Journal article on Fed speak, speculating that they will shift their stance on rates at next week's meeting.  However rates this morning are lower with the 10yr at a 2.22% with the 3yr auction on tap today, 10's and 30's later in the week.  Also contributing to the weak tone, news out of China that they are tightening collateral rules on short-term loans, squeezing the repo market.   The Yen and Gold are both higher, as oil rebounds off a five year low.

Main movers in the credit space:   RIG (Transocean) traded another 20-30bps wider yesterday with the 2038's now around an $80 cash price.  Genworth is opening weaker with the market, trading back toward recent lows.  No specific GNW news. Repsol has revived talks with Talisman , discussing the sale of assets or the entire company.  Credit positive for TLMCN and bonds/cds were 20-30bps tighter.

Despite a number of new deals the primary market and follow on trading in new issues was fairly quiet yesterday.  Not a lot of conviction from investors.  Penske brought a 5yr deal that didn't trade much on the break,  The Trans-Allegheny (FE) 10yr deal traded well at 2-3bps tighter.  The long Oklahoma Gas & Elec (OGE) 30yr was roughly issue bid to 1bp tighter.  Expecting at least one benchmark financial today.   On the economic data front only Wholesale Inventories MoM at 10am.


Municipal Bond Market
Munis were extremely quiet to start the week.  Today kicks off the second largest new issue week of the year with about $11.3bln scheduled over the next four days.  The highlight of today’s primary is $173mln Upper Occoquan Sewer Authorities and $138mln Minneapolis School districts.

We expect the secondary to remain quiet today with buyers focused on the primary market.   Cash from fund inflows continues to be put to work in new issue.

Volume in in PR GO 8’s of 2035 was light to start the week.   The largest trade of the day was 2mln+bonds trading@ $85.875 (9.58%).  Bonds continue to trade in the $85.50-$86.50 range.

30 Day visible supply: $14.92bln

New Issue:
$100mln Massachusetts GOs 6/2044  AAA
$138mln Minneapolis School District, 2016-2030 Aa2/AA
$173mln Upper Occoquan Sewer Authority, VA   2015-2041  Aa1/AAA