Tuesday, Jan. 20, 2015

Corporate Bond Market
Markets set to open higher following the MLK Day holiday.  Global equities up across the board overnight ahead of anticipated action by the Bank of Japan and ECB,  helped further by strong economic data out of China.  DJ Fut +81,  S&P Fut +11.3,  the 10yr Treasury last 1.826%, and oil at $47.50.  The tone this week should be set by earnings releases and economic data.

The credit market is opening up tighter with IG23 -1¼ at 70⅝/71⅛ last.  Cash spreads are unch to -2bps to start.  Morgan Stanley earnings missed this morning with the familiar refrain of declines in fixed income trading revenue in the fourth quarter.  Regions Financial also missed at .14 versus .206 expected,  Baker Hughes, Halliburton, and MGIC all beat.  Johnson & Johnson came in at 1.27 versus 1.26 expected and IBM to report later today.  In other headlines, Google is set to invest in Elon Musk's SpaceX.   Schlumberger is reporting a $1.7bn investment in Russian driller Eurasia.  Lastly there is news this morning that nine money managers are collaborating to create a dark pool for private trading to provide mutual fund shareholders lower costs and some insulation from high frequency traders.  These include Blackrock, T. Rowe Price and Fidelity to name a few.

Month-to-date new issue figures at $46bn with $15-20bn expected this week.  So far we have a new deal on the tape from Goldman Sachs , 5.5yr and 10yr.   In economic data, NAHB Housing Data at 10am, but the majority of the numbers come later in the week.


Municipal Bond Market
The tone in muni market remains strong yet again.  New issue is the highlight of the week with about $9bln in debt scheduled.  The market is currently on pace to match new issuance from Jan 2014.  We have seen about $19.4bln in debt priced so far this year compared to $27bln for the month of January in 2014.

Muni funds reported inflows of $668mln compared to $1.34bln during the previous week.  The market continues to see huge amounts of cash flowing into the market.  We expect buyers to continue to look at the primary market as their first option in putting cash to work.

Benchmark GOs traded slightly weaker to head into the weekend. The largest trade of the day was 5mm @ 85.50 (9.63%).  Bonds had traded in the $86-87.50 range for the past few weeks.   This is the first substantial trade that we have seen below $86 in about a month. 

30 Day visible supply: $12.5bln

New Issue:
Competitive: $1.7B
Negotiated: $7.1B

$1.75bln        Texas Transportation Commission   
$508mln        Alabama Federal Aid Highway Auth    Aa1/AAA
$459mln        Louisiana State Gasoline Fuel Tax     /AA
$450mln        East bay Municipal Utility Auth, CA     Aa1/

UST 10yr 1.817%