Tuesday, Mar. 10, 2015

Corporate Bond Market
The trend of the last few days continues overseas with European equities lower and bonds higher.  Euro Stoxx off roughly 1.10% on concerns of a Fed rate rise and continued fears over the Greek situation.  Bonds will continue to trade higher in the region as the ECB buyback continues.  Asian equities mixed.  Stateside the story is the same with treasuries rallying,  the 10yr last at 2.16%.   Equity futures sharply lower to start with the DJIA Fut -154 and S&P Fut -17.7.  Oil is trading at $49.57, and the dollar strengthened to its highest level versus the yen in seven years.   On the credit front we are opening weaker with the Investment Grade Index +1¼ at  64¾/65¼.

There was ratings action last night on Cliffs Natural Resources as S&P cut the senior unsecured debt to CCC+.  We believe that this was priced in as the bonds are already trading at triple C levels.  Clearly the market is focused on Iron Ore levels and speculating as to the duration of any price depression.  Elsewhere Credit Suisse is trading up on news of a new CEO.  Equity was up almost 9%.

The focus in the credit market really remains on the massive amount of supply coming to market.  Yesterday we saw $14bn come to market out of an estimated $30-35 for the week.  The leads were aggressive about ratcheting price talk and a few of the deals were simply issue bid on the break.  The star performer was the Credit Ag 10yr T2 that traded 15bps tighter before backing off a bit.  Hearing at least four deals on tap for today.  No names yet.  On the economic data front just Wholesale Inventories and Wholesale Trade Sales due out at 10am.


Municipal Bond Market
Munis are unchanged this morning after a quiet start to the week.  Secondary volume was weak yesterday as the market awaits this week’s massive new issue calendar.  Today’s focus will be the primary with NY ST GOs, Boston MA GOs, and Clark County Nevada coming to market.  We expect to see huge demand for this week’s new issue as cash continues to flow into muni funds. 

PR Benchmark GOs remained unchanged on the day.  6mm+ bonds traded around 83.50(9.89%) after trading around the same level for most of last week.  PR benchmark GOs are up about two points from the low of $81.50 (10.16%) in late February. 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: $16.16bln

New Issue:
140mln    Boston, MA G.O.s Series A    2016-2035    Aaa/AAA
129mln    Boston, MA G.O.s Series B Refunding    2016-2029    Aaa/AAA
181mln    Clark County, NV Flood Control Bonds    2016-2044    Aa1/AA
39mln    Delray Beach, FL    2016-2035    Aa3/AA-
72mln    Hartford County Mtro District, CT    2016-2-35    Aa1/AA+
11mln    Nekoosa, WI    2016-2033     /A+
180mln    New York State G.O.s Series 2015C    2015-2034    Aa2/AA
139mln    New York State G.O.s Series 2015A    2015-2045    Aa2/AA


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