Thursday, Feb. 19, 2015

Corporate Bond Market Comment
Global equities are mixed this morning.  European stocks had traded higher overnight as investors felt a Greek deal was imminent but are sliding now as Germany rejects the proposal citing lack of a 'substantive solution'.  Stateside equity futures are off a bit, DJIA FUT -18, S&P Fut -2.7.  There was no sharp reaction to yesterday's fed minutes.  The indication seemed to be the FED was open to keeping rates lower for longer as the strong dollar and uncertainty in Greece continue.  The 10yr treasury was last at 2.088%.  Oil is trading lower at 50.16 last. Credit markets had a strong session yesterday trading 5-10bps better across the board with nothing but better buyers.  We are giving a little of that back to start with the IG index +.5 at 64.25/64.75 to start.

Market Movers:  Barrick Gold announced this morning that they will reduce debt by $3bn and sell two mines. Initial quotes have the bonds trading 20-30bps tighter and the CDS 30bps tighter.  We should see follow on strength in similar names.  Elsewhere S&P lowered Genworth ratings two notches taking the senior debt to BB- from BB+. The rating agency cited concerns over weak operating performance and a need to gain regulatory approval of rate hikes to return LTC business to profitability.  CDS is trading 20bps wider this morning but in our view much of this rating move was priced in.  Lastly Sysco on the tape, hiring top antitrust lawyers in the event that the FTC tries to block the US Foods purchase.

The primary market was active yesterday with large deals from Waste Management  (10yr, 20yr and 30yr),  PNC Bank (3yr and 10yr), Phillips 66 (5yr, 10yr, 30yr), and Boeing (10yr, 20yr, and 30yr).  There was also a well received high yield deal from Pet Smart, who priced a 7.125% 2023 deal at par that traded up 2pts immediately.  The most follow on activity we saw was in the Phillips deal which is 5-7bps tighter across the board.  WTD we are at $8.65bn in supply , hearing at least one benchmark financial due today.  Economic Data: Initial Jobless Claims (8:30am), Bloomberg Consumer Comfort (9:45am), Philadelphia Fed Business Outlook (10:00am), and Leading Index (10:00am) are due to be released today.


Municipal Bond Market Comment
Munis are unchanged this morning after an extremely quiet day yesterday.  We continue to see large amounts of items out for the bid with very few items actually trading.    New issue remains light today with no notable deals scheduled, we expect buyers to put money to work in the secondary due to the lack of options in the primary. 

PR Benchmark GOs remain unchanged.  3mm bonds traded around $82.75(9.99%) after trading around that same level for most of the week.  We expect benchmark GOs to trade around this level until we receive more news on a potential new deal. 

30 Day visible supply: $8.83bln

New Issue:
23mln    Lexington, MA Gen Obs                               
6mln      North Greenbush, NY    2016-2045            /AA-
22mln    Suffolk, NY Ser A G.O.s  2015-2026            /A+
56mln    Suffolk, NY Ser B G.O.s  2015-2026            /A+

UST 10yr 2.063


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