Tuesday, Mar. 3, 2015

Corporate Bond Market
Global equities were down overnight.  In Asia the sell-off looks to be profit taking after recent gains,  while in Europe the down tick was led by a sell-off in banking stocks.  Barclays PLC the main mover as they announce an additional charge related to the currency-rigging probe.   Stateside equities are down as well with the DJIA Fut -15 and S&P Fut -2.40 as New York walks in. This is following yesterday's session where the Nasdaq closed above 5,000 for the first time in 15yrs. The treasury sell-off continues with the 10yr treasury yield at 2.096%.  Would expect this trend to continue into Friday's jobs numbers.  Oil up around $50 a barrel.  Credit opening unchanged for the most part.  The Investment Grade index currently 60½/61 which is where we closed.

The focus today in the credit markets will be the 9 tranche , $21bn new issue from Actavis which was announced yesterday.  Books closed around 1:30pm Monday with ~90bn in demand for the deal.  The deal should trade well if it is priced at or close to initial price talk.  Away from that deal there was also a 10yr and 30yr from MetLife which traded 1-2bps better on the break, and a 10yr from Discover Financial which traded 2-3bps better.  On the high yield side there were deals from E*Trade and American Airlines.  The AAL EETC traded up about half a point with better buyers, the ETFC 8yr deal closed 100½/101 having priced at par.  Hearing that in addition to the ACT deal there will be at least three other benchmark deals today.  Estimates for the week are $40-45bn in new supply.

In secondary trading, Genworth was in the news again citing 'material weakness' in its 10k, specifically in the Long Term Care accounting.  The stock sold off about 8% on the headlines while the bonds traded down about a point.  This appears to be just another piece of the puzzle as the company works to right the ship.  Citigroup has announced plans to sell OneMain Financial, their subprime lender,  to Springleaf for an estimated $4.25bn. On the economic data front: ISM New York (9:45am), IBD/TIPP Economic Optimism (10:00am) are due to be released today.  


Municipal Bond Market
Munis are unchanged this morning after a sloppy start to the month.  The drop in treasuries mixed with a heavy week of supply (about $8bln) put pressure on munis.  We saw large amounts of items out for the bid very few items actually trading.  (A1/AA-) Clark Co, NV LT 5s in the 6/2018-2029 range traded at +34/+37bps versus bonds re-offered in the competitive primary last week through +30bp spreads.  Today’s focus should remain on the primary with a decent amount of micro deals set to price.  We expect inflow money to continue to flow into new deals rather than the secondary.

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:
75mln    Cambridge, MA G.O.s Sr A    20162035    Aaa/AAA
10mln    Goodhue County, MN    2017-2030    Aa2/
8mln    Hyde Park Central School District, NY    2015-2029   
16mln    Monticello, NY Central School District    2015-2019     /AA-
2mln    Nixa Fire Protection District, MO    2016-2025     /A+
61mln    Richland County, SC SD No. 2 G.O. Refunding    2016-2023    Aa1/AA


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