Friday, Jan. 23, 2015

Corporate Bond Market
Another strong start for global equities.  The ECB announcement yesterday was well received as enough support for the European economy and the markets are reacting as such.   DJ Fut +40 ,  S&P Fut +4.1 to start.   Oil is currently at 46.32, and the 10yr treasury is at 1.818%.    The plan unveiled by ECB President Mario Draghi is valued at 1.14 trillion euros.   The credit markets continue to rally as well with the investment grade index currently -1.5 at 66.25/66.75.  That’s back from a wide of 73 earlier in the week.   Cash spreads are tighter across the board and we have already seen large customer buying lists indicating a risk on mentality among investors this morning.

In credit news GE earnings beat this morning coming in at .56 v. .54 expected.   The company was able to offset the impact of falling commodity prices with increased sales in other areas.   Honeywell is also on the tape this morning beating analyst expectations by .02.    The primary market brought $8bn in new corporates yesterday marked by a large deals from Morgan Stanley and US Bank.   The Morgan Stanley 10yr deal was particularly well received with the 30yr tranche trading 10-15bps tighter almost immediately.  We saw nothing but follow on buyers.  The US Bank deal was also tighter, with the 10yr having priced at +95 and traded at least to +91 in secondary.    This brings month to date new issue to $66bn out of an estimated $95-100bn for January.

Economic Data:  Chicago Fed Nat Activity Index (8:30am), Markit US Manufacturing PMI (9:45am), Existing Home Sales (10:00am), Leading Index (10:00am) are due to be released today.

 

Municipal Bond Market
The tone in muni market feels slightly stronger this morning after a small sell off yesterday.  New issue remains light today with no notable deals being priced.  We expect to see huge demand in the primary next week with yet another week of substantial inflows. 

Muni funds continue to see huge inflow numbers as $771mln poured into funds this week compared to $689mln during the previous week.  Debt issuance hit a 5 week high this week with $9.8bln being priced.  We continue to see cash flowing into the muni market with very few places to put money to work.  Buyers seem to be hesitant to transact in the secondary market and have been favoring the primary lately. 

Benchmark GOs continue to trade slightly weaker. Bonds traded around $84.00 after trading as high as $85.50 last Friday. We have seen bonds trade in the $85-$87 range over the past two weeks.

30 Day visible supply: $9.58bln

UST 10yr 2.897%