Monday, Feb. 9, 2015

Corporate Bond Market
There is a negative tone to the markets this morning as New York walks in with global equities down and treasuries rallying, signaling a risk off mentality among investors worldwide.  S&P Fut -68  DJIA Fut -8.6, 10yr Treasury at a 1.92%.  In Europe, Greek headlines taking stocks lower as PM Tsipras reaffirmed his rejection of the nation’s bailout.  The yield on 3yr Greek government bonds jumped to 21.66% (+366bps), and to 10.82% on the 10yr debt (+71bps).  European banking stocks so far the hardest hit by the weakness underperforming other sectors to start. Oil holding steady to start at $52.41. OPEC headlines this morning indicating they have cut their forecasts for global oil supply growth in 2015 as US producers lead the slowdown in drilling. Credit is opening weaker with IG23 +1 at 66¾/67¼, cash spreads are +1-2bps, retracing Friday's move tighter after strong Jobs Report numbers.

Market Movers:  Motorola Solutions (MSI) is said to be putting itself up for sale with private equity firms on the short list of potential buyers.  MSI bonds are trading +20bps to start , though most debt has CoC language.  The US Steelworkers strike continues.  Hardest hit facility owners include Shell, Tesoro, Marathon Petroleum, and LyondellBasell.

Last week's busy new issue calendar was capped with the two tranche Dollar Tree (DLTR) high yield deal.  The deal was marketed all week and as the book built it was clear there was extremely strong demand.  Bonds are up 2.5-3pts in early trading.  We are expecting another busy week and have heard of at least 3 benchmark deals on tap for this morning.  Names to follow as and when.  Slow day on the economic data front:  Labor Market Conditions (10am).  The bulk of the releases are later in the week with Retail Sales, Jobless Claims, and U of Mich data.


Municipal Bond Market
The muni market is slightly stronger this morning after ending last week significantly weaker.   New issue picks up this week about $7bln in new issuance versus a weekly average of $5.7bln.  We expect the primary to be the focus of the week.  Highlights include $280mln Maryland Trans and $340mln Washing St motor vehicle tax.

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 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: $10.318bln

New Issue:
$300mln    Pennsylvania Higher Ed, Thomas Jefferson   A1/A
$240mln    Gwinnett County SD, GA GO  Aaa/AAA
$195mln    West Valley Mission, CA Aaa/AAA