Friday, Feb. 27, 2015

Corporate Bond Market
Global equities mixed this morning to end the week. Despite the German parliament's approval of the extension of Greece's bailout plan , European equities are slightly off their highs.  Strong economic data out of Japan boosting the Nikkei, while focus in China is on the National People's Congress meeting that begins next week.  Stateside US Equity futures are down to start, DJIA Fut -14, S&P Fut -3.5.  We don't expect to see much flow ahead of this morning's economic data which will no doubt set the tone.  Treasury yields are back up with the 10yr trading above a 2% again at 2.031%.  Oil down to $48.93,  within this week's range. Credit opening up unchanged to +1bp for choice after trading +2-4bps yesterday with most of the market focused on the new issues.

In market moving headlines, Cliffs announced an exchange offer this morning.  The company has offered to exchange up to $750mm aggregate principal for newly issued 7.75%  2020 Senior Secured Notes.  Priority has CLF 6.25 2040 first in line (up to 325mm),  CLF 4.875 2021 are second with no cap. Early exchange levels look to be about 10-12pts high of last secondary trading levels.  Lloyds Banking Group is on the tape reporting an profit and resumption of dividends.  More good news for the already well bid yankee banking names.   Microsoft also in the news with layoffs in Asia as they continue to tackle their antitrust issues in China.

Yesterday was a very busy day in the primary market, bringin the WTD new issue numbers to $35.6bn out of an expected $20-25bn.  For a short month the corporate market saw $103.18bn.  The large deals yesterday were from Caterpillar, Xerox, Williams Partners, HSBC, Woodside Finance, and high yield issuers Sabine Pass and Markwest Energy.  As has been the trend,  the price talk tended to start attractive and get aggressively tightened into pricing.  Most of the deals trading right around issue to slightly tighter.  We are not expecting much to price today.

Look for Economic Data to set the tone today: GDP Annualized QoQ (8:30am), Personal Consumption (8:30am), GDP Price Index (8:30am), Chicago Purchasing Manager (9:45am), U. of Mich. Sentiment (10:00am) are due to be released today.    


Municipal Bond Market
Munis are unchanged this morning after a mixed day yesterday.  New issue was met with strong demand as some deals were priced slightly more aggressive than anticipated. (A3/A-/A-) $568mln New Orleans Aviation bonds (11/2024-2045) were bumped by 3bps-6bps.

Muni inflows jumped to $429.3mln compared to inflows of just $59mln last week.  Muni funds continue to see cash flowing into the primary as this weeks $9.5bln in new issuance was met with strong demand. 

PR Benchmark GOs were unchanged on the day.  Bonds continue to trade around @ 83.50 (9.94%) compared to trading around $82.375 (10.04) last week.  We expect benchmarks GOs to remain in this range until we get more information on a potential new deal or a new ruling on the bankruptcy law. 

30 Day visible supply: $10.08bln

New Issue: no notable new deals.


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