Monday, Jan. 12, 2015

Corporate Bond Market
The tone is firm this morning as New York walks in, with equity futures up across the board.  DJIA Fut: +89,  S&P Fut: +10.7, looks like a strong session for European equities overnight led by a pop in Greek names, and Asian markets traded mixed.  Credit spreads are unch to -1bps in early trading after a week that closed unch to a couple wider on significant supply.  We are expecting another busy week for the primary market with at least 4 deals on tap for this morning.   The 10yr treasury is currently 1.972%, and oil is at 47.13.  The front end of the treasury curve has outperformed in the last few sessions leading to a slightly steeper curve than we saw initially the first week of January.

In Corporate news, Roche announced plans to acquire a $1bn stake in Foundation, a US based genomics company.  Roche equity was up about 2% on the announcement. In secondary trading we are still seeing better buying for the most part from our accounts, though they are selective about where they care.  Higher beta sectors remain active with fast money accounts and we've traded a lot of Alcoa, MTNA, CHK, Cliffs, and Genworth over the past few sessions.

In the primary market we have new deals on the tape already from ANZ Bank, which is coming to market with a 3yr (fixed or floating), and Aircastle which is bringing a 7nc deal.  Given the success of the recent AirLease deal we would expect this to perform.  In terms of economic data this week: Monthly Budget Statement (1/13), MBA Mortgage Application (1/14), Retail Sales (1/14), Empire Manufacturing (1/15), PPI (1/15), Initial Jobless Claims (1/15), CPI( 1/16), U of Mich. Sentiment (1/16).


Municipal Bond Market
Muni new issuance will start to pick up this week after a slow start to the year.  The primary calendar is currently around $7bln compared to$3.9bln last week.  We expect to continue to see strong demand for new deals as buyers continue to see massive fund inflows and need to put cash to work.

This week’s primary will be highlighted by $560mln King County, WA Sewers and $502mln Illinois finance authority (Rush medical center).  The calendar is currently filled with multiple smaller deals ranging from 50m-500mln, instead one highlighted deal. 

$1.3bln poured into muni funds last week, the most since January of 2013…We continue to see substantial amounts of cash pouring into the muni market and very few places to put it to work.

PR GO’s 8’s of 2035 have started to stabilize after volatile trading in December.  2mm GOs traded @ 86.625 (9.49%).  Bonds continue to trade in the $86-$87 dollar range after trading as low as $94.50 in early December.

30 Day visible supply: $11.3bln

New Issue:
$560mln    King County, WA Sewer Revs    2016-2047    Aa2/AA+
$502mln    Illinois Finance Auth (Rush University Med Ctr)       
$40mln    Greenwich, CT G.O.s    2016-2035    Aaa/AAA
$16mln    Alabama Drinking Water     2016-2027     /AA
$131mln    Orange County, CA Sanitation District    2028-2037     /AAA
$58mln    Spokane, WA  G.O.s

TSY 10yr 1.969%