Wednesday, Jan. 28, 2015

Corporate Market Comment
US Equity futures are up to start this morning,  DJ Fut +27,  S&P Fut +7.7, hopefully erasing some of yesterday's decline on the weaker-than-expected Durable Goods number.  Overseas Asian equities were up on strong earnings expectations, and European stocks were down for the most part on continued turmoil in Greece.  As concern mounts that newly elected PM Tsipras will rollback austerity measures,  Greek bonds continued to tumble.  The yield on Greek 3yr notes traded as high as 16.89% up from a pre-election yield of 10.08%.  The 10yr note was up another 100bps to 10.49%.  Stateside , the treasury market is little changed ahead of today's FOMC decision, 10yr last at 1.821%.  Oil fell 1.5% to $45.50.

The credit markets are opening unchanged to start with the IG23 index slightly wider at 67⅛/67⅝ (+½).  The main mover yesterday, in thin snow-day trading, was CLiffs Natural Resources.  Trading in the stock was halted in CLF mid-afternoon and they soon announced plans to bankrupt their Bloom Lake entity and insulate the parent from the obligation.  This was expected and widely interpreted as positive news for the beleagured CLF bonds.  The 2018's were most active trading up 4-5pts following the announcement, wrapped around $85.   As earnings season rolls on, Apple reported monster numbers last night and the stock is up roughly 7.3% pre-market.  The bonds tend to trade very tight so wouldn't expect major movement there.  US Steel also reported end-of-day yesterday.  The headline numbers looked strong.  We have been sellers of the X 7.375 2020 and still see good value throughout the curve.

There was no new issue yesterday with so much of New York out of commission but I would expect a few deals today in an effort to reach end of the month goals.  I would also expect today to be the day for follow on buying of Monday's new issues,  SYF, SIVB, and UNP 20yr in particular which performed well initially then went quiet.  On the economic data front: focus on FOMC rate decision due out at 2pm.


Municipal Bond Market
Munis are slightly stronger this morning walking in.  We saw light volume due to the storm.   About $1.7bln in primary deals were postponed and it is still unclear whether they will be priced this week or next.  Today was scheduled to be one of the more active days on the new issue calendar and we expect to see them go off without a hitch.  The more notable names on tap for today are $289mln San Francisco GOs, $49mln Spoke WA GOs, and $96mln Univ of Illinois.

Benchmark GOs have begun stabilizing in the $84.50-$85 range after a slight sell over the past week. 3000m bonds traded Monday @  $84.875 after trading as high as $85.50 last week.   We should see the benchmarks continue to trade in this range until we get more color on the potential pricing of a new PR deal. 

30 Day visible supply: $10.7bln

New Issue:
$289mln    San Francisco, CA G.O.s    2015-2030    Aa1/AA+
$49mln    Spokane, WA G.O.s    2027-2034    Aa3/AA
$96mln    University of Illinois Refunding Rev    2016-2038    Aa3/AA-

UST 10yr 1.825%