Thursday, Feb. 5, 2015

Corporate Bond Market
Yesterday's Greece/ECB headlines caused European stocks to decline overnight. Essentially the ECB announced it would no longer accept certain Greek debt as collateral from banks as doubts increase over the government's commitment to austerity reforms. The yield on the Greek 10yr bond climbed to 10.20% on the news and the Stoxx Europe 600 declined .3%. Greek bank stocks were down anywhere between 5-10%. Stateside stocks sold off yesterday into the close on these headlines but this morning we are higher with the DJIA Fut +89 and S&P Fut +12.9. US Treasuries are selling off with the yield on the 10yr now 1.798%. Oil trading at $49.11. Credit is opening up stronger with IG23 -1⅛ at 66⅝/67⅛ after having closed 2-3bps weaker. Cash spreads are unch to -3bps.

Market Movers: AT&T bonds traded +10bps yesterday, while it is not immediately clear what is driving the weakness it seems to be combined deal risk and headlines about new FCC regulations. Pfizer has agreed to buy Hospira Inc in a deal valued at $17bn. Hospira has rallied at least 30bps on headline closing the almost 90bp gap between where the two credits historically trade. Frontier Communications is in the news as the edge closer to a deal to buy Verizon's wireline assets. The deal valued at $10bn. Lastly AstraZeneca reported a Q4 loss and their intention to buy Actavis' branded respiratory business for $600mm. Cliffs Natural Resources continues to trade up following Monday's earnings and investor call. The 2018 issue is now up 6pts as the company continues to signal proactivity when it comes to reducing debt and improving their financial situation.

In Corporate new issues we saw deals from New York Life, DR Horton, and Tencent Holdings yesterday. The NY Life deal in particular performed well with tough allocations and nothing but buyers on the break. The Aaa rating was in high demand reinforcing what we've already seen in secondary trading - investors are still clamoring for high quality 10yr and in assets. Expecting today to be active again with at least 2 benchmark deals in the works. WTD we are at $17.3bn out of an estimated $20-25bn. Economic Data: Initial Jobless Claims (8:30am) came in at 278k versus 290k , Trade Balance (8:30am) came in at -46.6b versus -38b, and Bloomberg Consumer Comfort (9:45am) are due to be released today.

Municipal Bond Market
The tone in muni market is slightly weaker again this morning after an extremely weak day of trading yesterday.  Munis followed USTs throughout the day and secondary trading was sloppy with most buyers remaining on the sidelines.  $1.1bln Trinity Health’s were delayed to day-to-day due to market conditions. We should see a similar trend today.

PR Benchmark GOs continue to stabilize in the low $80s. We saw block of 2mm bonds trade @ 83.75 (9.86%). Benchmark GOs have seen a significant decline since trading in the $85.50 (9.63%) -$88 (9.32%) range for most of January. We expect bonds to continue to remain in the low $80s until we get more color on any potential new PR deal.

30 Day visible supply: $7.13bln

New Issue:
$32mln Iowa State Board of Regents, (IA State U Sci & Tech) 2016-2040 Aa2/AA-
$25mln White Plains, NY Gen Obs 2017-2035 Aa1/
$29mln Wyandotte/Kansas City Unified Gov't., KS Sr.A 2016-2035 Aa3/AA
$21mln Wyandotte/Kansas City Unified Gov't., KS Sr. D 2015-2025 Aa3/AA
$3mln Wyandotte/Kansas City Unified Gov't, KS Txable 2016-2025 Aa3/AA


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