Friday, Mar. 13, 2015

Corporate Bond Market
Global equities are mixed as New York walks in, US equity futures are down.  DJIA Fut -30, S&P Fut -3.  Treasuries are unchanged for the most part to start with the 10yr last at 2.112%.  Look for the economic data at 8:30 to set the tone.  PPI and U of Mich both due out.  Oil trading lower at $46.00.   The dollar continues to strengthen.  For the week ending March 11th, Lipper is reporting net inflows of .571bn into Corp-IG funds and net outflows of $1.956bn in high yield funds.  Those numbers are consistent with secondary flows we saw.

The credit market had a strong session yesterday alongside the equity rally despite another $10.65bn in issuance coming to market.  The Investment Grade Index is opening marginally wider at 64⅛/64½ +½.  The name of the game was hybrids with both MS and BAC bringing deals.  MS brought a PerpNC5yr @ 5.55% fixed to float , which immediately traded up with better buyers.  BAC brought a PerpNC10yr @ 6.10% fixed to float which was also up about a half a point.  This morning Citigroup has announced they are also bringing a new hybrid , PerpNC5yr , initial price talk is high 5's.  There were a number of other interesting deals as well including LLoyds, United Rentals, BP, EOG,  and a rare single A from oil driller Helmerich & Payne that immediately tightened 20bps with better buyers.  WTD new issue number at $44bn,  MTD at $97bn, with syndicate desks expecting another $25-30 next week.

Cliffs continues to trade weaker as uncertainty still surrounds their pending exchange offer and intentions in the capital markets.   Glaxo in the news selling half of its stake in Aspen Pharmacare for $835mm.  Economic Data:  PPI Final Demands (8:30am), U. of Mich. Sentiment (10:00am) are due to be released today.

 

Municipal Bond Market
Munis are mixed this morning after closing stronger yesterday.  Today’s focus should be on the secondary after a strong week of new issuance.  This week’s deals were met with extremely strong demand with the majority being priced more aggressive than expected. 30 day supply dropped slightly to $11.84bln from $12.4bln Thursday.  We are about $5bln off the high that we saw earlier in the week.

Muni funds flows hit a three week low as $150mln in new cash flowed into muni funds.  HY funds saw outflows of $51.4mln after two straight weeks of inflows.  The trend over the past few weeks has been large funds inflows which have absorbed the above average amount of new deals coming to market.  We could see some weakness over the next few weeks if new issue remains at this pace and if we continue to see light fund inflows/outflows.

PR Benchmark GOs were unchanged on the day after a substantial rally to start the week.  Bonds traded as high @ 85.25(9.67%) after trading around $83.25 (9.93%) earlier in the week.  PR benchmark GOs are up about 3.50 points from the low of $81.50 (10.16%) in late February.  Bonds rallied on news that the PR House of Representatives passed legislation to authorize the sale of $2.95bln in oil tax supported bonds.  The sale is expect to occur within the next few weeks

30 Day visible supply: $11.84bln

 

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