Tuesday, Feb. 3, 2015

Corporate Market Comment
Firm tone to the markets across the board this morning.  Global and Asian equities all up, US stock futures firmly in the green: DJIA Fut +66, S&P Fut +8.4.  Oil up about 3.5% to $51.10. The US treasury market selling off, bringing the 10yr yield to 1.71% in early trading.  Overseas there is more optimism on the Greek situation as the government backs off from its call for debt write-down, and the 10yr Greek Goverment bond yield slid to an even 10%. Germany making headlines this morning as the yield on the 10yr German bond fell below that of Japan for the first time on record.  Credit opening firm as well with IG23 -1bp at 67½/68, and cash spreads a couple tighter to start. 

The focus in the Corporate market yesterday was the five tranche Apple Inc deal which priced, 5yr fixed and floating, 7yr, 10yr, and 30yr.  It was well received and traded a couple tighter in early markets last night.  The firm tone moving it again this morning with better buyers across the board.  Capital One also priced a 3yr and 10yr deal which was fairly quiet and Netflix came to market with a non-call 7yr and 10yr.  The Netflix deal garnered a lot of investor interest pricing at par and trading up 0.5-1pt almost immediately. We have a few sellers into strength this morning. We expect today to be another busy new issue day. No deals announced yet.

Other market movers: Cliffs Natural Resources (CLF) reported after the close with strong numbers and a sound strategy for debt reduction and asset sales.  There was a lot of noise in the report and not much traded last night while analysts digested the release. Early indications were quoting the bonds up 3-4pts.  The 2018 issue has been the most active here.  We saw some real money selling of the 30yr sector to buy 10yr paper.  Looks like the street is having trouble holding onto 10yr paper as inventories are light and demand remains high.  On the economic data front: ISM New York (9:45), Factory Orders (10am) Survey -2.4%.                


Municipal Bond Market
The tone in muni market is slightly weaker again this morning.   The focus of the market will remain on the primary today with pricing of the week’s largest deal,  $1bln PA GOs, which was delayed from last week.  We expect this week’s deals to see huge demand as buyers continue to have a tremendous amount of cash to put to work after last week’s inflows. 

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: $12.3bln

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

26mln     Harlan County School District, KY    2015-2026    Aa3/
180mln   Long Beach, CA Unified School District    2015-2043    Aa2/AA-
1bln        Pennsylvania Stat G.O.s    2016-2035    Aa3/AA-

UST 10yr 1.671%