Wednesday, Feb. 18, 2015

Corporate Bond Market Comment
There is a firm tone in the market this morning with European equities leading the charge, as the eurozone shows renewed confidence that Greece will reach a deal on an extension of their bailout.  The yield on 3yr Greek government debt is trading down to 17.50%,  and 9.93% on 10yr.  US equities are pretty much flat to start after a strong session yesterday.  The market seems to be waiting on this afternoon's Fed minutes, and any indication on rate-hike timing therein, before taking any real direction.  Credit is unchanged to slightly tighter after trading 1-5bps better yesterday depending on sector.  The IG index is 65/65.25,  -.25bps to start.  The sell-off in the treasury market continues with the yield on the 10yr now 2.145%.  Oil is trading right around 52.63.

Secondary activity was fairly quiet yesterday.  We had better buyers for choice but are finding it difficult to source paper as most of the market is looking for the same names.  The street's inventory seems light.  The primary market only saw $3.25bn of supply yesterday,  marked by deals from Sumitomo Misui (5yr and 3yr FRN), Amerisource Bergen (10yr and 30yr), BNZ (3yr), Ryder Systems (5yr), and high yield issuer USG (10nc8).  The USG deal priced at 5.5% and was extremely well received: it traded up 1-2pts almost immediately.  The price talk on the ABC and R was tightened but both deals managed to trade 1-5bps better.  The ABC 30yr was the standout there.  I am hearing about a number of deals on tap today including a benchmark industrial and a benchmark financial.  WTD issuance expectations at $12-17bn , out of which only $3.25bn has printed.

Economic Data: MBA Mortgage Applications (7:00am), Housing Starts (8:30am), PPI (8:30am), Industrial Production MoM (9:15am), Capacity Utilization (9:15am), Net Long Term TIC Flows (4:00pm) are due to be released today.


Municipal Bond Market Comment
The tone in munis is slightly weaker this morning after yesterday’s sells off.  Liquidity was scarce as buyers continue to put large amounts of items out for the bid with very little transactions.  The highlight of today’s new issue $256mln Fairfax County GOs and $95 University of Maryland bonds.

We expect buyers to focus primarily on the new issue market today with any leftover cash flowing into the secondary.  Muni funds continue to keep huge sums of cash on the sidelines with very few places to put cash to work.

PR Benchmark GOs were mostly unchanged to kick off the week.  5mln+ traded around $82.50(10.03%) after trading around that same after Thursdays downgrade news.

30 Day visible supply: $9.89bln

New Issue:
256mln  Fairfax County, VA Gen Obs                    2015-2034      Aaa/AAAA
17mln      Knox County, TN                                      2016-2019       Aa1/AA+
57mln     Lexington County School District, SC     2016-2030      Aa1/AA
95mln     Maryland University System                    2016-2028      Aa1/AA+

UST 10yr 2.143%


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