Tuesday, Mar. 24, 2015

Corporate Bond Market
Global equities were mixed overnight, with most of Europe trading higher on solid economic data and Asian stocks giving back some of their recent gains.  We will wait and see if the Eurozone stays positive as news breaks of a plane crash in the south of France.  Euro Stoxx currently +.15%.  Stateside equity futures are up for starters with the DJIA Fut +41 and the S&P Fut +3.75.  Oil is trading higher, up +.25% at 47.70, as the dollar weakened on data forecasting a decline in US Consumer prices.  Treasuries are rallying this morning with the 10yr last at 1.90%.  Credit opening unchanged after a fairly uneventful session yesterday.  The Investment Grade Index is unchanged at 62.5/63.  We saw decent two way flow from accounts in the secondary.

The primary market saw $10bn in new issue yesterday.  The focus was on the HSBC hybrid, Perp Non-Call 10yr deal that priced at a 6.375%.  Initial talk was 6.625% but at 6.375% the market still felt it looked cheap and piled in.  The bonds are up about 2pts in early trading with a back-end floating rate that worked out to +4.368%.  We continue to like and see value in this asset class.  The other star performer was the Credit Suisse Funding 5yr and 10yr issue.  Though they priced $4bn in debt the deal was oversubscribed and traded tighter almost immediately.  Potash priced a 10yr deal at +115 , and both Kimco Realty and Southwestern Elec Power brought 30yr deals.  Expecting at least 2 large deals today, possibly financials.  Estimates for the week are at $20-25bn.

In secondary action, Chesapeake was on the tape into the close announcing a significant reduction in capex and an increased equity stake from Carl Icahn.  Bonds were quoted all over the place and traded up about .50pt walking out.  We will re-rack this morning as we get more definition.  The hybrid market had a firm tone as demand built for the new HSBC.  We have better buyers of most issues including the recent Citi 5.875%.   On the economic data front: CPI (8:30am), Markit US Manufacturing PMI (9:45am), New Home Sales (10:00am), and Richmond Fed Manufacturing Index (10:00am) are due to be released today.


Municipal Bond Market
Munis are slightly stronger this morning after a quiet start to the week.  Volume was extremely light and we saw a decent amount of items out for the bid in the early morning, although very few items actually traded.  Buyers seemed to be on the sidelines ahead of this week’s new issue which is heavily weighted towards mid-week.

We should see the market focused on new issue today.  It seems as if we see the same items out for the bid every day, however, very few transactions.  New issue seems to be one of the few options to put inflow cash to work. 30 day supply rebounded to $12.8bln from numbers as low as $7.5bln last week.

PR benchmark GOs stabilized after a steady decline over the past few days.  Bonds traded around @ $83.00(9.96%) to start the week after trading as high as $86.625 (9.56%) last 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: $12.835bln

Deals we will be bidding:
154mln    Seattle, WA G.O. Refunding    2016-2040    Aa1/AA+
65mln     South Broward Hospital District, FL    2016-2045    Aa3/AA-
36mln     Sunrise, FL G.O.s    2016-2044    Aa2/
22mln     University of Kentucky Gen Receipts Refunding Sr. C    2015-2026    Aa2/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
94mln     Wake County, NC G.O.s    2017-2035    Aaa/AAA


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