Friday, Jan. 16, 2015

Corporate Bond Market
Global equities are mixed and US equity futures are down to start as the market continues to deal with currency volatility.  The treasury market is lower to start with the 10yr last at 1.724%.  Oil holding steady at $47.47.  The Investment Grade credit index is slightly wider at 73.5/74 to start, roughly +¼.  Cash continues to trade +1-5bps depending on the sector.  Earnings continue to come in with Suntrust, Comerica and PNC all beating expectations this morning. Goldman Sachs also beat with a $4.38 versus $4.36 expected.

In credit news , BP continues to make headlines over settlement figures on the Gulf of Mexico spill.  Looks like a maximum fine of $13.7bn is the high end.  Elsewhere Dish Network reached a new multiyear distribution agreement with FOX  which should be positive for the credit.  The primary market was active with a large deal from JPM (5yr and 10yr), and a new hybrid from WFC that priced at 5.875%.  The JPM priced just too tight for the market to digest and is trading marginally wider.  The WFC deal came cheap with a nc10yr structure and high back end and traded up a point almost immediately.  The recently issued CHS 7.5% preferred also rallied hard with better buyers across the board.  This brings WTD issuance to $20bn ahead of the long weekend.  We expect today to be quiet.

In secondary trading we remain better buyers of yieldy front end paper.  Cliffs continues to trade very well with significant buying interest in the 2018 issue.  The hybrid space was more active than it's been on the heels of the new deal and we saw better sellers of low back end structures across the board.  On the economic data front:  CPI (8:30am), Industrial Production (9:15am), University of Mich Sentiment (10:00am) are due to be released today.


Municipal Bond Market
The tone in muni market remains strong this morning as we continue to rally.  We continue to see customers putting out large BW lists with very few items actually trading. 

Muni funds reported inflows of $668mln compared to $1.34bln during the previous week.  We continue to see huge amounts of cash flowing into the muni market with very places to put it to work.  New issuance has been light to start the year and volume remains low in secondary trading.  We should see the majority of the cash on the sidelines until we see an uptick in new issuance.

Volume in PR GO 8’s of 2035 was rebounded after a day of light trading. The largest trade of the day was 10mm+ @ 86.00 (9.57%).  Bonds continue to trade in the $86-$87.50 dollar range.

30 Day visible supply: $12.18bln

New Issue:
No notable deals today.

TSY 10yr 1.773%