Wednesday, May 13, 2015

Municipal Bond Market
Munis are stronger this morning after mixed trading yesterday.  Volume was extremely light with very few items out for the bid.  Attention was on the primary yesterday with the pricing of $887mln Salt River Project revenue bonds and $500mln CT GOs.  Salt River 4’s of 2033 priced @ 3.50% and were met with strong demand.  We should see attention shift to the secondary today with some of the week’s larger deals already priced.  30-day supply is slightly weaker this morning with $13.5bln on tap compared to about $14.5bln yesterday.

In credit news, Moodys downgraded the City of Chicago to Ba1.  The cut to junk will put pressure on Chicago to potentially pay as much as $2.2bln in fees to end swap contracts.  A cut to junk has been priced into Chicago paper over the past few weeks.  Bonds are unchanged in early morning trading.

PR benchmarks GOs were unchanged yesterday after rallying throughout last week.  Bonds continue to trade around 79.00 (10.53%) after trading as low as $77 two weeks ago.  We continue to see pressure on insured paper with very bidders out there.  Ambac insured highways traded as low as $89.80 (6.07%) after trading as high as $92 (5.88%) last week.  We should continue to see pressure on corporation debt as we approach the July 1st payment and talks intensify over a new deal.

30-Day visible supply: $13.58bln