Corporate Bond Market
The focus this morning will be on the payroll data due out at 8:30am. Nonfarm Payrolls (8:30am) 240k survey, 321k prior, Unemployment Rate (8:30am) 5.7% survey, 5.8% prior. To start DJIA fut -47, S&P Fut -5.5, and the 10yr tsy last at 1.997%. In Europe, the ECB is presenting options for buying up to 500bn in euros of Investment Grade Assets in a program that would take them halfway toward their goal of averting a deflationary spiral. Stateside credit spreads opening unch after Thursdays session where most sectors traded 1-5bps tighter. So far the IG index is opening slightly wider at 68⅞/69⅜ (+⅝).
The secondary market remains active particularly with individual headline making credits. MWV traded tighter yesterday on news they were spinning off their specialty chemical business. We saw better buyers of the name. Cliffs Natural Resources (CLF) was on the move again, gapping higher on news they may reopen one of their Iron mines. We saw better buying of the 2018's and 2021's, both up 3-4pts in active trading. Elsewhere AbbVie has indicated higher than expected earnings (4.45 versus 4.25). That should give the name a boost. In the insurance space XL Group is buying specialty insurer Catlin for $4.2bn. Both the XL 6.5% hybrid debt and the CGLLN 7.249% hybrids have been active with better sellers. Despite the fact that Lipper is reporting OUT-flows of $922mm this week from High Yield, mostly all comprised of ETF selling (89%), we have seen better buyers of the HY space -particularly higher quality/xover names.
The primary market was fairly quiet yesterday with deals from SUMI (3yr and 5yr), and Exelon Generation EXC (5yr) the only ones of note. Both traded a few bps tighter. WTD $24.60bn , est $30-35bn, MTD estimates still at $95-100bn which means some busy weeks ahead.
Municipal Bond Market
Munis were weaker for the second straight day. We saw a large amount of items out for the bid with more items trading than Wednesday’s session.
Munis continue to see massive fund inflows. $1.3bln poured into muni funds, the most since January of 2013…We continue to see substantial amounts of cash pouring into the muni market with very few places to put cash to work. New issue has remained light to start the year so we expect cash to be put to work in the secondary until we see adequate supply.
Volume in in PR GO 8’s rebounded after a light start to the New Year. 5mm+ GOs traded @ 87.00 (9.44%). Bonds continue to trade in the $86-$87 dollar range after trading as low as $94.50 in early December.
30 Day visible supply: $11.1bln
No notable deals today
Tsy 10yr 2.018%