Monday, Mar. 16, 2015

Corporate Bond Market
Global equities are all up overnight with European stocks leading the way on speculation that the weaker Euro will boost earnings.  Euro Stoxx +.83% as New York walks in and Germany's Dax topping 12,000.  Stateside equity futures are all up, signaling a possible rebound from the past few sessions.  DJIA Fut +67 and S&P Fut +8.25.   This week, the focus will be on the Fed meeting, which begins tomorrow and ends Wednesday with a press conference.  The treasury market is up with the long end outperforming to start,  the 10yr yield last at 2.09%. Credit is opening unchanged with the Investment Grade index at 65½/66 last.   Commodities are lower again which will impact higher beta credit names this morning.  Oil at $44.28, natural gas also lower.

The focus in the credit markets remains the enormous amount of supply we have seen over the past two months.  While deals were oversubscribed and tended to trade okay on the break, most are leaking in secondary trading with little follow through demand.   MTD we are $97bn with at least three large deals on tap for today.  Friday saw our third new hybrid of the week as Citi brought a fixed to floating PerpNC5yr deal.  The deal priced at the wider end of the range,  5.875%, and is trading just over par.  We would expect a few more of these structures now that the bank stress tests are behind us.

Not much in the way of credit headlines this morning.  BP in the news with a large investment in Egypt that could produce 3bn barrels of oil.  The company also has nagging issues as the US Government appeals the ruling on the reduced potential penalty of their Gulf of Mexico clean up obligation.  GE also on the tape shedding more non-industrial, non-core assets with the sale of their Australian consumer lending arm.  All positive for the credit and their strategic focus.  In economic data:  Empire Manufacturing (8:30am), Industrial Production (9:15am), Capacity Utilization (9:15am), NAHB Housing Market Index (10:00am), Net Long term TIC Flows (4:00pm), Total Net TIC Flows (4:00pm) are due to be released today.


Municipal Bond Market
Munis are slightly stronger this morning after a quiet trading day Friday.  The focus will remain on the primary again this week with over $8bln in new issuance on tap.  This is will be the 10th straight week with $8bln+ in new deals.  

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 rallied last week on news that the common wealth will price a deal in the next few weeks.  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. 

30 Day visible supply: $11.5bln

New Issue:
Competitive: $1.3B
Negotiated: $6.9B

$878mln    Hawaii State GO.s    Aa2/
$376mln    North Carolina Med Care Commission, Vidant Health    A1/A+
$296mln    Oregon State G.O.s    Aa1/AA+


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