Thursday, Mar. 26, 2015

Corporate Bond Market
The weak tone in global equities that began yesterday afternoon continues this morning as tensions in the Middle East mount.  Euro Stoxx -1.47%,  Nikkei -1.39%,  Hang Seng -1.58%, and stateside the picture is no rosier with DJIA Fut -119,  and S&P Fut -13.50.  Treasuries are rallying small to start with the 10yr last at 1.922%.  Oil higher again at 51.31.  Credit sold off with stocks though not as much as one might have expected. The IG index closed +2 on the day , and is opening another +1 at 65¼/65¾.  Cash spreads closed +2-4bps and are opening another +1-2bps.

In credit news,  the new Cliffs deal got done yesterday.  They priced an 8.25% 2020 deal at $93.25.  Bonds traded up in the $94-95 range immediately and gave secondaries a nice boost.  We traded the 2018's a few times up a few points from Wednesday's pre-deal close.  Elsewhere, the UK Government sold more of its stake in Lloyds, bringing its share from a high of 40% down to 21.9%.  Lloyds announced they would resume dividend payments now that it has returned to profitability.  Lastly Expedia and Orbits are currently in talks with the DOJ to provide more information about their planned acquisition, as fears of limited competition resulting from the deal persist.

In the primary market, we saw deals from ALLY (5yr, 10yr), Franklin Resources (10yr), Goldman Sachs (5yr, 10yr), and Navient Corp (long 5yr).   There was also an interesting new hybrid deal from Colombia Telecom , partially owned by Telefo and Colom.  They brought an 8.5% nc5yr that traded around issue.  So far today we have seen a new AT1 issue from Standard Chartered but not much else.  Expecting at least one benchmark industrial unless the weaker tone causes issuers to hold off.  WTD we are at $17.75bn versus $20-25bn expected.   On the economic data front:  Initial Jobless Claims (8:30am), Markit US PMI (9:45am), and Bloomberg Consumer Comfort (9:45am) are due to be released today.

 

Municipal Bond Market
Munis are unchanged this morning after another extremely quiet trading day yesterday.  Attention continues to remain on the primary market as we continue to see light secondary trading. In the primary,  CA Golden State tobaccos ($1.6bln) saw extremely strong demand yesterday with the deal seeing 10bp bumps in most maturities.30 day supply declined by about $4bln to $8.37bln from $12.5bln the day before.

PR benchmarks GOs were unchanged on the day. Bonds continue to trade around $82.00 (10.10%) after trading as high as $86.625 (9.56%) last week.  PR debt sold off earlier in the week as PREPA plans to meet with bondholders today to discuss extending their creditor agreement that will expire next week.

30 Day visible supply: $ 8.37bln

Deals we will be bidding:
16mln    Jonesboro School District No. 1, AR    2016-2028    Aa3/
156mln    Montgomery County, MD    2016-2031    Aaa/AAA
24mln    North Hempstead, NY     2015-2027   
40mln    North Texas Municipla Water District, TX       
49mln    Wichita, KS G.O.s    2016-2025     /AA-
39mln    Wichita, KS Water and Sewer Utilities Rev Bonds    2015-2031     /AA-

 

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