Tuesday, Mar. 17, 2015

Corporate Bond Market
Global equities are all in the red this morning with European stocks leading the decline as German investor confidence numbers came in lower than expected.  Euro Stoxx off -0.97% as New York walks in.  Oil continues to fall,  off another 0.96% to $42.91. The Fed meeting begins today, with the press conference tomorrow setting the tone for the market going forward. The treasury rally continues with the 10yr last at 2.05%.   The credit market traded weaker yesterday despite the equity rally.  Cash bids were scarce and paper continued to leak wider in the absence of any real customer buying. That tone looks set to continue with the IG index is opening +1 at 66/66.5.

The primary market saw a large deal from EMD Finance LLC yesterday, guaranteed by Merck's German arm and trading under a new ticker - MRKGR.  We didn't see as much client demand as anticipated given the new name but they refrained from tightening the price talk too aggressively and it appears issue bid to start. Australian issuer APT Pipelines brought a 10yr and 20yr.  Hyundai Capital priced 3yrs and 5yrs, and Campbells Soup priced a 10yr deal.  The star performer was the 10yr deal from Vulcan Materials which we heard was done largely on reverse inquiry.  It was trading up roughly half a point on the break.

As mentioned above, the bulk of our secondary inquiry is client selling.  The recent new issues continue to be everyone's favorite item to launch.  Retail buyers were quiet to start the week.   The buyers we do have seem focused on the front end, yankee bank paper in particular, illiquid situations that trade to cheap to on-the-runs, and some basis opportunities as high yield sells off. Light economic data calendar today save for Housing Starts and Building Permits, both due out at 8:30am.  


Municipal Bond Market
Munis are stronger this morning after a quiet trading day to start the week.  The focus will be on the primary today with multiple deals less than $100mln (Beaufort County SC, Bellevue WA, Cecil County MD) 30 day visible supply declined slightly to $10.6bln from 11.5bln.  Supply had dropped substantially from the $16.5bln we saw in mid-February.

In credit news, Puerto Rico will delay the issuance of $2.92bln in new debt until early may.  The commonwealth said the delay was due to ongoing negotiations with potential buyers.  The news was released later in the day and PR debt was unchanged after the announcement.  We may see slight weakness this morning after almost a weeklong rally.

PR Benchmark GOs were unchanged on the day after news that PR will delay issuance of $2.9bln in debt.  Bonds traded as high @ 86.00(9.57%) after trading around $83.25 (9.93%) last 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

Deals we will be bidding today:
62mln    Beaufort County, SC G.O.s    2018-2032    Aa1/AA
73mln    Bellevue, WA School District No. 405    2018-2027    Aaa/AA+
14mln    Bridgewater-Raynham, MA School District    2016-2032    Aa2/
35mln    Cecil County, MD G.O.s    2016-2027    Aa1/
10mln    Coon Rapids, MN G.O.s    2016-2030    Aa1/
14mln    Garner, NC     2016-2035    Aa2/AA+


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