Tuesday, Feb. 10, 2015

Corporate Bond Market
Firmer tone to the market this morning as Greece offers compromises ahead of their emergency meeting with creditors tomorrow.  The yield on the 3yr Greek debt fell to 20.05%.  Equities are up globally with Euro Stoxx +45,  DJIA Fut +104, S&P Fut +13.10.  US Treasuries are down again bringing the yield on the 10yr to 1.994%.  Oil still trading in yesterday's context, $52.36 last.  Credit opening firmer with IG -1 to start at 65¼/65¾.   The focus yesterday was on the 10.75bn deal from Microsoft which is trading better this morning after getting off to a slow start last night.

In credit news, Coca-Cola reported - beating analyst estimates through cost cutting and re-focusing on higher priced drinks.  EPS came in at .44 versus .42.  Pfizer is making headlines with the announcement of a $5bn accelerated share buyback program.  The stock was up .7% after hours.   The US Steelworkers union strike is now in its 10th day with affected companies set to resume negotiations. The recently issued JPM 6⅛ preferred was green-shoed yesterday and traded down .05 on the additional issuance.

The primary market was active yesterday with $12.25bn of new issuance , the bulk of which comprised of the 6-tranche Microsoft deal.  The 40yr seems to be the one in demand as there is little AAA paper out that far and real money is clamoring to add.  Elsewhere first time issuer MPLX priced a 10yr deal at +210 that traded to 198/195 almost immediately.  So far this morning there is a new deal on the tape for Citigroup,  5yr Senior notes.  Hearing at least two other large issuers set to announce deals.  Expectations for the week are $20-25bn.  Economic Data:  NFIB Small Business Optimism (9:00am) and Wholesale Inventories (10:00am) are due to be released today.


Municipal Bond Market
The muni market is unchanged this morning after a slow start the week.  The highlight of today’s primary is the pricing of $177mln Washington GOs.   We expect WA GOs to face strong demand with any left over money flowing into the smaller deals set to price today. 

PR Benchmark GOs were significantly weaker after Puerto Ricos recovery act was deemed unconstitutional buy a US district court judge.  We saw block trading around $81(10.23%) to start the day before bonds rallied back slightly in the afternoon with 5mm+ trading @ 82.125 (10.08%).

PREPA debt rallied almost 10pts on the news..4615m 74526QXB3 traded @ $59 yesterday, after trading @ 50.75 on feb 4th.  Bond holders believe that more GO money will have to be committed to PREPA debt with the recovery act no longer in the picture.

30 Day visible supply: $10.80bln

New Issue:
81mln    Franklin Township, NJ Board of Ed    2017-2035
28mln    Box Elder County School District, UT    2015-2029
94mln    Coastal Carolina University, SC    2015-2042
8mln    Fargo Pub School District No. 1, ND    2026-2027
43mln    Flagler County, FL    2015-2025