Friday, Feb. 6, 2015

Corporate Market Comment
Friday brings with it bitter cold and higher US Equities.  DJIA Fut +9, S&P Fut +.7.  Focus is on the just released Payroll Data,  but so far stocks are still  green and we are poised for our biggest weekly gain of this year.  Change in NonFarm Payrolls came in at 257k versus 228k expected.  Unemployment Rate up slightly to 5.7% from 5.6%.  US Treasuries selling off post numbers with the 10yr +7bps at 1.875%. Oil is up 2.8% back to $52 which is a 7.6% rally on the week.  Credit is opening unchanged after a strong day yesterday with better buying across the board.  The IG index closed -2¼ and is opening unch from that tight close.  Elsewhere equities are mixed with Europe and China trading down while Japanese equities rally.  The ECB has announced they will allow the Greek Central Bank to provide close to $60bn in emergency funding for the countries bank. The yield on the 10yr Greek bond currently 9.95%.

In credit news,  Radioshack filed for bankruptcy protection last night at no surprise to anyone watching the situation.  They also announced a potential deal with Sprint to take over their stores. Verizon is back in the news confirming their intention to sell wireline assets to Frontier Communications for $10bn.  Would expect FTR to trade down on the news.

Yesterday was a busy day for new issue with a monster deal from Merck who priced $8bn in 5yr, 7yr, 10yr, and 30yr tranches at a significant concession to secondaries.  The deal performed extremely well with significant follow on buying from accounts.  Elsewhere UNBC (MUFG USA) priced a 5yr and 10yr deal that also performed well, and JP Morgan came to market with a new $25 par pfd at 6.125%.  The deal is fixed for life which hasn't been the most attractive structure but was still well received. That brings WTD new issue to $29bn, not expecting much to price today. 


Municipal Bond Market
The muni market is quiet this morning as the market awaits economic numbers.   New issue is nonexistent today and we expect buyers to be completely focused on secondary trading.  The muni market has felt weak for the majority of the week as traders continue to cut offerings and put items out for the bid.

Municipal funds continue to see substantial inflows of cash.  Lipper Funds reports $589mln in new cash versus $892mln in inflows last week.  We expect to continue to see buyers focused on the primary market as large amounts of cash sit on the sidelines. 

PR Benchmark GOs continue to stabilize in the low $80s.  We saw block of 2.5mm bonds trade @ 83.50 (9.89%).  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: $9.27bln

New Issue: no notable deals