Wednesday, Feb. 11, 2015

Corporate Bond Market
Global equities were mixed overnight and stateside we are a bit weaker but without a lot of conviction to start.  DJIA Fut -32 and S&P Fut -2.7.  Investors seem to be waiting for the outcome of the Greek showdown with creditors today.  The yield on the 3yr Greek Government bond climbed 145bps to 20.95%.  Treasuries are marginally higher this morning with the 10yr last at 1.983%.  Oil is trading at $50.16 this morning.  Credit is opening unchanged to a touch weaker after a strong session yesterday.  The IG index is +⅛ at 65⅞/66⅜, cash unchanged to start after closing 1-5bps tighter.

The main mover this morning is Genworth.  The company reported last night , finally quanitifying their LTC charge at $735mm.  While the number was on the higher end of investor expectations, clearly the clarity on the situation was well received.  The bonds are trading up 8-9pts in early activity and the stock is up around 8.80 in pre-market trading.   The CDS is roughly 120bps tighter to start. The conference call on the results just began (8am), updates to follow after the call.   Elsewhere Halliburton was in the news announcing lay-offs of 5,000-7,000 workers in an attempt to cut costs and manage falling oil prices.  Glencore announced this morning that it will cut CAPEX in the same vain.  Lastly American Movil reported a Q4 loss.

In secondary activity the recently issued JPM 6⅛ preferred traded up after having sold off a bit following the green-shoe.  The additional shares seem to have been cleaned up and the stock is on the move.  We saw $8.5bn in primary new issue yesterday with large deals from Citigroup (5yr), Ally Financial (3yr and 7yr) , Deutsche Bank (3yr), BPLN (2yr, 3yr, 5yr), Enterprise - ERAC (30yr),  and High Yield issuers Suburban Propane and Univision to name a few.  The SPH deal in particular looks attractive trading up .5-1pt in early activity.  It's a small deal and a solid credit and we would expect continued follow on buying. Economic Data:  MBA Mortgage Applications (7:00am), Monthly Budget Statement (2:00pm) are due to be released today. 


Municipal Bond Market
The municipal market is unchanged this morning after a weak trading day Tuesday.  Yesterday’s WA GO deal was met with caution and priced about 12-15bps cheaper than where bonds have been trading in the secondary.  We expect buyers to focus on the primary today highlighted by $280 MD Transit Authority. 

In PR news, lawmakers removed a limit on yields for a planned $2bln bond sale.  Originally, bonds could not be sold for less than 93 cents on the dollar.  This news should have the biggest impact on the GO 8’s of 2035 and we expect to see additional weakness.  We have seen no trades in the name yet this morning. 

PR Benchmark GOs were unchanged on Tuesday after trading significantly weaker from Puerto Rico’s recovery act announcement.  We saw block trading around $82.125(10.08%) which is right around where we closed on Monday. 

30 Day visible supply: $9.7bln

New Issue:
280mln    Maryland Department of transportation    2018-2030
36mln    Minnesota State College and University System    2015-2035
41mln    Minnesota State College and University System *Taxable*    2016-2035
16mln    North Charleston, SC G.O.s    2017-2029