Monday, Mar. 9, 2015

Corporate Bond Market
Global equities down overnight, mostly on concern that the US jobs data from Friday indicated a sooner than expected rate increase.  European stocks also lower on renewed concerns out of Greece.  It appears the country's latest proposal fell short of what was expected by EU officials.  On the flipside bonds are higher overseas as the ECBs bond buying program began with sovereign debt purchases.  The jobs report also put pressure on equities at home with the S&P suffering its largest sell-off in two months on Friday.  To start we are unchanged to marginally lower with the DJIA Fut -1 and the S&P Fut +.40.  The 10yr treasury yield slightly off its highs at a 2.218% last.  Oil down to $49.70 in early trading.  Credit is weaker to start with the Investment Grade index +1¼ at 62.50/63 last.  Cash spreads are unchanged to start, which is fairly remarkable given how much supply we saw last week.  Last week's fund flow data, as reported by Lipper, indicated net inflows of $1.638bn into Corporate IG funds, and .309bn net inflows into High Yield funds.

A fair amount of market moving headlines this morning.  Up first, General Motors on the tape with a $5bn stock buyback program to be completed by the end of 2016.  The company has stated its intention to return free cash flow to shareholders while maintaining its investment grade rating.  This appears to be part of a larger agreement reached with activist investor Harry Wilson and his hedge fund consortium.  More headlines on low iron prices putting pressure on names like CLF and RIOLN.  Rio Tinto in particular announcing a global internal restructuring as they look to cut costs and adjust to this market environment.  Alcoa is on the tape with an acquisition of aluminum producer RTI in a stock for stock transaction valued at $1.5bn.  AA bonds unchanged to start.

Following last week's $53bn in corporate supply , the primary market is set to be busy again with $30-40bn in new issue predicted.  Hearing at least six deals on tap for today - no names announced yet.  MTD expectations are for $120-130bn in new issue.  Economic data light today with Labor Market Conditions Index due out at 10am.


Municipal Bond Market
Munis are slightly stronger this morning after Friday’s sell off after the payroll number.  The focus of this week will be the primary market as we hit a 3 month high with $12.8bln in new issuance.  The calendar is full of some notable names as New York City GOs, University of CA, and Rhode Island tobaccos prepare to come to market.  We have seen $68bln year to date in new issuance so far, which is an 88% increase from last year.

We continue to see new deals soaked up by inflow money week after week. 

Muni funds reported strong inflows yet again with $408mln in new money vs. inflows of $429mln last week. 

PR Benchmark GOs were unchanged on the day.  5mm+ bonds traded @ 83.25(9.93%) after trading around the same level for most of the week.  PR benchmark GOs are up about two points from the low of $81.50 (10.16%) in late February. 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: $15.15bln

New Issue:
Competitive: $1.8
Negotiated: $11B

$1.6bln    University of California Limited Purpose Bonds     Aa3/AA-
$1.14bln   University of California Gen Purpose Bonds     Aa3/AA-
$578mln    Dallas, TX Waterworks and Sewer Bonds    Aa1/AAA
$700mln    New York City G.O.s
$618mln    Rhode Island Tobacco Settlement


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