Monday, Feb. 2, 2015

Corporate Bond Market
Slow start this morning as our second winter storm couples with post super bowl hangovers to keep a lot of investors from their desks.  Equity futures are up so far, signaling a strong start to the month: DJIA Fut +44, S&P Fut +4.9.  As the heart of earnings season wraps up , 78% of companies that reported beat analyst estimates.  Global equities mixed overnight. We expect all eyes to remain on Greece in the near-term, where the 3yr government bond yield dropped to 18.52% as the country's Prime Minister and Finance Minister tour Europe to gain support for their plan. Yields on US Treasuries are up with the 10yr last at 1.669%.  Oil is up at $48.91.  Credit is unchanged to start but would expect it to trade tighter as the market gets started.

In Credit News: Exxon reported EPS of 1.56 versus 1.339 expected, which should underscore the firm tone in equities. Dish Network is in the news as regulators claim they have abused small business discount incentives.  We have not seen any movement in the bonds yet.  Last week we saw $16bn in new issue come to the Credit Markets.  That brought total supply for January to $81bn.  Estimates for February coming in around the same,  $80-90bn expected to price.  There have been no deals announced yet this morning but anticipating at least one benchmark financial deal.  In secondary activity we continue to see better buyers, particularly of yieldy front end paper.  We released a trade idea on Friday in the hybrid sector.  Please take a look.

Economic Data:   Personal Income (8:30am), PCE (8:30am), Markit US Manufacturing PMI (9:45am), Construction Spending MoM (10:00am), ISM Manufacturing (10:00am), ISM Prices Paid (10:00am)  are due to be released today.  


Municipal Bond Market
The tone in the muni market is slightly weaker this morning.  The focus of the market will remain on the primary with about $8.5bln scheduled.  A few notable deals to watch this week will be the pricing of $955mln Trinity Health’s,  $1bln PA GOs (Delayed from last week), $450mln VA School Building Authority.   We expect buyers to remain focused on the primary as we continue to see huge inflows of new cash ($892mln).

In credit news, PREPA is asking creditors for a three month extension to restructure operations.   Originally, PREPA had planned to submit a plan to restructure $8.6bln of debt by March 2nd.  Trading was scarce in the name, however, select buyers have started to trade the credit flat.   

PR Benchmark GOs were significantly weaker to end the week.  We saw multiple blocks of 5mm+ trading around $83.625 (9.87%), after trading as high as $86.30 (9.53%) on Thursday.

30 Day visible supply: $12.02bln

New Issue:
Competitive: $2.2B
Negotiated: $6.3B 

$955mln    Trinty Health Care Group (MI, ID and MD)    Aa3/AA-
$499mln    LA Dept of Airports, CA   
$323mln    Iowa Finance Authority    Aaa/AAA 

UST 10yr 1.676%