Monday, Mar. 23, 2015

Corporate Bond Market
Tough session for European equities overnight, Euro Stoxx -.95% as New York walks in.   It will be a decisive week for Greece as Prime Minister Tsipras is set to meet again with Merkel to discuss the bailout.  US Equities look set to follow suit with DJIA Fut -5 and S&P Fut -.75.   Credit finished the week on a strong note post-Fed, giving a little back with equities to start.  The IG index is +½ at 63¼/63¾.   Cash spreads feel unchanged for the moment. Oil is retreating a bit from its recent rally to $46.22 last.   The global supply glut will continue to weigh heavily near term.  The treasury market continues to rally with the 10yr last at 1.909%.

Early focus in the credit market is a new hybrid issue from HSBC.  They are set to print a benchmark Perp Non-Call 10yr deal with initial pricing being talked at an attractive 6.625%.   While it will most likely price tighter, the deal is getting good demand already from overseas accounts.   We would expect a busy week in the primary market away from this deal as well.  The much anticipated Cliffs Natural Resources $500mm , 5nc2, 1st Lien Senior Sec notes are set to price at some point.  A successful deal should help bring some stability to secondary levels.

Away from the primary markets we saw better buyers of credit into Friday last week.  Higher quality high yield and crossover names were catching a bid, as were some of the recent new issues that had leaked wider in previous sessions.  We remain active in CHK, front end RIG paper (2015-2018),  CIT, AER, and MTNA.  We are also seeing better buyers of Aussie credits, APAAU, SYDAU, QBEAU to name a few.  On the economic data front:  Existing Home Sales due out at 10am.


Municipal Bond Market
Munis are slightly stronger this morning after a quiet trading day Friday.  New issue is scheduled to be $7.8bln this week versus about a $7.5bln weekly average for the year.  The majority of this year new issue has been supported by substantial inflow numbers; we could see some weakness in the primary this week as inflows continue to decline.    30 day supply jumped to $12.8bln versus an average of about $8bln last week.

PR benchmark GOs stabilized after a steady decline over the past last week.  Bonds traded around @ $83.00(9.96%) on Friday after trading as high as $86.625 (9.56%) earlier in the week.  We expect GOs to remain in this range until we receive more news on the pricing of the new deal.   

30 Day visible supply: $11.8bln

New Issue:
49mln    Fort Lee, NJ Board of Ed (Bergen County)    2017-2041   
79mln    Los Angeles, CA Solid Waste Recovery Project    2016-2024    Aa2/
85mln    Oklahoma City, OK    2017-2035    Aaa/AAA
154mln   Seattle, WA G.O. Refunding    2016-2040    Aa1/AA+
110mln    University of Kentucky Gen Receipts Refunding Sr. B    2015-2027    Aa2/AA
148mln   University of Kentucky Gen Receipts New Money Sr. A  2016-2045    Aa2/AA
114mln    Anne Arundal, MD G.O. Refunding    2016-2027
269mln   Anne Arundal, MD G.O. New Money    2016-2035
450mln   New York Municipal Water Authority        Aa2/AA+/AA+


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