Wednesday, Mar. 11, 2015

Corporate Market Comment
Brighter picture this morning in the global equity markets than we've seen the past couple of sessions.  European stocks up across the board as the ECB enters day three of their bond buying program.  Talks between Greece and ECB officials continue , but expect it to remain in the headlines over the next few weeks. Asian equities mixed with the Nikkei trading up , and Chinese equities slightly off.  Economic data in China coming in slightly lower than expected, signaling continued stimulus on tap for the region.  Stateside equity futures are up with DJIA Fut  +60, and S&P Fut +8.6.  Treasuries selling off to start with the 10yr last at 2.144%. Oil is trading at $48.48 as New York walks in.  Credit spreads are unchanged to start after trading 1-5bps yesterday.  The Investment Grade index closed +1¼ last night, though the tone felt weaker than that.  It is opening this morning -⅜ at 64⅜/64⅞.  Higher beta sectors were definitely wider than that, metals and mining in particular.

In corporate news the CLF exchange is due to be completed today as $1.25bn in new debt is issued in response to investors exchanging their 2040 and 2021 debt.  We traded lower yesterday but would expect prices to rebound after the results of the exchange are complete.  In secondary activity we saw mostly sellers into yesterday's weakness, with particular pressure on the recent new issues. The one spot where we see continued demand for paper is 5yrs and in high quality and 2yrs and in yankee bank paper.

The primary market saw another $15bn in supply come to market with a large deal from Zimmer Holdings accounting for about half of that.  Other names we saw were Priceline Group (10yr deal), ING Bank (3yr and 5yr), American Honda (3yr and 5yr) and Sempra Energy (5yr) to name a few.  There wasn't much trading at the end of the day, felt like some new issue fatigue coupled with a weak tone yesterday keeping a lot of players sidelined.


Municipal Bond Market
Munis are unchanged this morning after a mixed trading day yesterday.  New issue was the highlight of the day with the pricing of some of the week’s largest deals (NYC GOs, Boston GOs, and University of CA).  The NYC $670.8 million Series C bonds were priced to yield from 0.74% with a 4% coupon in 2017 to 3.65% with a 3.625% coupon in 2035.  We expect to see attention split between the secondary and the primary today with some of the week’s smaller deals set to price today. 

PR Benchmark GOs rallied slightly on the day.  5mm bonds traded @ 83.75(9.86 %) after trading around $83.25 (9.93%) earlier in the 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: $13.8bln

New Issue:
17.5mln U of IA Facilities Corp (Old Capital Town Center)    2016-2031    Aa1/AA
11.8mln   U of IA Fac Corp (IA U of Science and Tech) * 2016-2033    Aa1/AA
8.6mln    Kingston, NY Public Improvement     2016-2035     /AA-
5mln    Medway, MA    2016-2029     /AA
50mln    Parkway C-2 School District, MO    20131-2035     /AAA
21.55mln    Portsmouth, VA Series A    2021-2030    Aa2/AA
28.9mln    Portsmouth, VA Series B *Taxable*    2015-2028    Aa2/AA


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