Friday, Feb. 13, 2015

Corporate Bond Market Comment
Equities up across the board ahead of the long weekend.  DJIA FUT +33, S&P Fut +2.9.  Oil set to end the week strong trading up at $52.65.  The news flow out of Greece continues to be positive which is helping the tone in Europe.   Treasuries selling off again this morning with the 10yr last at a 2.01%.  Credit set to trade better today after a week that saw a significant rally in a lot of the higher beta sectors.  Metals/Mining names closing out strong, GNW continuing to rally, etc.  The IG23 index is -¾ to start at 64⅜/64⅞.

Lipper is reporting inflows of $2.9bn into high yield funds, with 41% ETF related.  That is the third consecutive week of inflows and the rally we've seen reflects that.  This is the largest inflow in 72 weeks. On the investment grade side, inflows of $2.335bn were reported.

The primary market yesterday brought a large deal from Lockheed Martin.  They priced a 10yr, 20yr, and 30yr that was well received and traded 3-5bps better across the board.  We saw most follow on buying in the 10yr tranche.  We wouldn't expect today to be a significant new issue day ahead of the long weekend.  On the economic data front:  Import Price Index MoM came in at -2.8%  vs. -2.5% prior,  YoY at -8%   vs -5.5% prior.  U of Mich data due out at 10am. 


Municipal Bond Market
Munis continue to feel weaker this morning after another sloppy day of trading Thursday.  We continue to see large amounts of items out for the bid with very little actually trading.  Dealers seem hesitant to take losses as the market continues to backup.  We expect buyers to continue to focus on the primary with secondary volume so weak. 

Munis continue to see strong fund flows with $460mln in inflows. New money continues to accumulate on the sidelines as buyers have very few places to put it to work.  

In credit news, PR GOs were downgraded to B from BB by S&P.  Senior lien COFINA debt was also downgraded to B from BBB.  We have not seen any trades in either name this morning; however, we expect COFINA debt to be more negatively impacted by the news.

PR Benchmark GOs have not traded yet this morning, but we should see them to open up slightly weaker after last night’s S&P downgrade.  Bonds were unchanged yesterday with 5mln trading $82.25(10.06%).

30 Day visible supply: $9.19bln

New Issue: no notable new issuance.