Thursday, Feb. 26,2015

Corporate Bond Market
Very strong start to the markets globally as investors around the world bet on increased and extended economic stimulus from central banks.  European equities are all up, and stateside DJIA Fut +13, and S&P Fut +2.5.   The treasury market continues to rally aggressively with the yield on the 10yr note now 1.944%.  In Germany yields on their 7yr notes fell below 0% for the first time.  Oil is up a bit trading at 50.30.  The credit market continues to rally, following a strong day yesterday, and the IG index is tighter again at 61¼/61¾.  Higher beta sectors continue to outperform and we have seen better buyers across the board, particularly of energy and metals and mining.

In credit news, RBC was on the tape yesterday with particularly strong earnings.  They have topped TD as the largest Canadian Bank by assets.  On the flip side RBS had a tough quarter reporting their seventh consecutive loss on US writedowns.   The new issue market was very busy yesterday dominating investor attention.  American Express priced a new hybrid deal, nc 5yr  @ 4.9%. This pricing was aggressive from the initial 5.25% talk and many real money investors dropped out of the deal.  Bonds trading right around par this morning.  The 10yr and 20yr deal from Agrium performed well with significant follow on demand 2-5bps tighter.  The other star performer was the Juniper Networks deal which was at least 5bps tighter.  No deals announced yet today but would expect it to be busy.

There is a significant amount of economic data due out at 8:30 which should set the tone for the rest of the day:  CPI,  Durable Goods, Cap Goods, Initial Jobless Claims, Continuing Claims, FHFA House Price Index, etc.


Municipal Bond Market
The tone in munis is slightly stronger this morning after a quiet trading day yesterday.  The secondary market received most of the attention with a lull in this week’s larger than average new issue calendar.  (Aaa) $5mln+ Texas GO (c 24) 5s of 10/2025 traded at 2.21% (+9bps) vs. trading @ 2.24% earlier in the week.  We should see attention shift back to the primary today.  Notable names include Bryan TX, GOs and Provo City, UT School Bonds.

PR Benchmark GOs were unchanged on the day with very light volume.  Bonds continue to trade @ 83.125 (9.94%) compared to trading around $82.375 (10.04) last week. 

30 Day visible supply: $10.08bln

New Issue:
43mln    Bryan, TX ISD G.O. Refunding  *PSF*    2016-2028    Aaa/AAA
44mln    Bryan, TX ISD G.O. New $ *PSF*    2016-2040    Aaa/AAA
47mln    Provo City, UT School Bonds    2016-2035    Aaa/
49mln    Rock Hill, SC School District #3    2018-2032    Aa1/AA


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