Monday, Mar. 2, 2015

Corporate Bond Market Comment
Global equities are mixed to start the week.  European stocks are off, led by a decline in some of the higher beta sectors including energy.  Asian equities are all up as the Chinese Central Bank cuts interest rates for the second time in three months.  Stateside equity futures are up slightly.  DJIA Fut +1, S&P Fut +.10.  Oil declined again to $48.88, down about 1.8%. Treasuries are mixed with the 10yr trading either side of that 2% level, last 2.005%.  The credit markets are opening unchanged so far with the Investment Grade Index at 61/61½.  Cash spreads are also unchanged after a week that saw close to $40bn in supply. According to Lipper, last week saw net inflows of $1.318bn into Investment Grade Corporate funds while High Yield funds saw net inflows of $1.085bn.  There is a fair amount of economic data due out this week , ending with jobs numbers on Friday, which should set the tone as we get underway.

Actavis has finally announced their anticipated $22bn bond issue to finance the Allergan aquisition.  Initial size on the deal looks to be about $20bn divided between 8 tranches (18month, 2yr, 3yr, 5yr, 7yr, 10yr, 20yr, 30yr). Elsewhere  a few market movers:  Avon Products was downgraded on Friday to BB by S&P on profitability deterioration.  This is notable as the downgrade triggers a 75bp coupon step on the 2016, 2020, 2023, and 2043 issues, taking effect March 15th. Boston Scientific making headlines this morning with the purchase of Endo International's men's health unit for $1.6bn.   Cardinal Health has agreed to buy Johnson & Johnson's Cordis business for $1.94bn in cash.  Looks like CAH will issue some senior unsecured  notes to fund part of the acquisition.  E*Trade also bringing a new issue,  $460mm 8yr senior notes with the intention of taking out their ETFC 2019 issue.  Also hearing at least one other industrial and one index financial due out today.  In secondary markets   Cliffs remains active as the market continues to process the exchange offer.

Economic Data:  Personal Income (8:30am), Personal Spending (8:30am), PCE (8:30am), Markit US Manufacturing PMI (9:45am), Construction Spending (10:00am), and ISM Manufacturing (10:00am) are due to be released today.

 

Municipal Bond Market Comment
Munis are unchanged this morning after a quiet end to the month on Friday.  The focus of this week will be new issue yet again, with about $9bln in deals scheduled.

Muni new issuance continued to soar in February with a 78.5% increase from last year.  New deals totaled $56.54bln in the first two months of the year, making this the biggest year in new issuance since 2010.  Demand remains strong in the primary and we continue to see deals being taken down right away. 

Muni inflows jumped to $429.3mln compared to inflows of just $59mln last week.  Muni funds continue to see cash flowing into the primary as last week’s $9.5bln in new issuance was met with strong demand. 

PR Benchmark GOs were unchanged on the day.  Bonds continue to trade around @ 83.50 (9.94%) compared to trading around $82.375 (10.04) last week.  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: $12.22bln

New Issue:
Competitive: $2.6B
Negotiated: $6.3B

$495mln    Los Angeles Water and Power    Aa3/AA+
$252mln    Arizona University Board of regents    Aa3/AA+
$297mln    Cypress-Fairbanks ISD, TX  *PSF*    Aaa/AAA

UST 10yr 2.007%

 

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