Thursday, Jan. 15, 2015

Corporate Bond Market
Very volatile session yesterday as the aggressive sell off in equities and accompanying treasury rally left many investors on the sidelines unsure of what their next move should be.  The tone feels a little better this morning.  Stateside US equity futures are unchanged/mixed :  DJIA +1, S&P -2.4. European equities are all up.  Surprise headlines out of the region as Swiss National Bank unexpectedly announced the end of the minimum exchange rate.  The franc jumped 17% against the Euro as a result.  The 10yr treasury is opening 1.841%, and oil currently at $49, perhaps a slight reprieve from the commodity market sell-off.

Yesterday was a tough day in credit.  The IG index traded between unch and +2 all day.  Spreads were 2-10bps wider depending on the sector with the high beta energy names more like +20-30bps.  Earnings out this morning:  Bank of America  coming in at .32 versus .313 expected.  Similar to the story we got from JPM yesterday, BofA's fourth quarter profit suffered from a significant decline in fixed income trading revenue.  BlackRock Inc beat with a 4.82 versus 4.679 expected, and Lennar Corp is on the tape at 1.09 versus .96 expected.  Tough numbers out of Citigroup, coming in at .06 versus .088 expected.  Once again the poor performance attributed to a drop in year-end trading. Elsewhere Petrobras is expected to release unaudited financials on Jan 27th after delaying the release.  Apache Corp has announced it will lay off 5% of its workforce.  Lastly Adobe had announced a share repurchase program.

There was no significant new issue, save a 5yr deal from Macquarie Bank Ltd.  Not expecting much in the way of primary activity today or until we get some rate stability.  The recently issued CHS 7.5% $25 par deal is trading well and continues to be well bid in retail.  Economic Data:  Empire Manufacturing (8:30am) PPI Final Demand (8:30am), Initial Jobless Claims (8:30am), Bloomberg Consumer Comfort (9:45am), and Philadelphia Fed Business Outlook (10:00am) are due to be released today.


Municipal Bond Market
The tone in muni market remains strong this morning as we continue to chase treasuries for the fourth straight day.  The trend of small to medium size deals continue today with the pricing of $40mln Greenwich CT, GOs,   and $45mln Tulsa OK, GOs.  

We continue to see large amounts of items out for the bid from end accounts with very little bonds actually trading.  Today should wrap up the bulk of the new issuance for the week, as a result, we expect to some money being aggressively put to work in the secondary. 

Volume in PR GO 8’s of 2035 was light after two days of strong demand. The only substantial trade of the day was 5mm+ @ 86.50 (9.50%).  Bonds continue to trade in the $86-$87.50 dollar range.

30 Day visible supply: $11.02

New Issue:
$36mln    Rushford-Peterson, MN Independent SD     2017-2035
$26mln    Southington, CT   
$45mln    Tulsa, OK G.O. Refunding    2016-2027
$40mln    Greenwich, CT G.O.s    2016-2035

TSY 10yr 1.833%