Tuesday, May 19, 2015

Municipal Bond Market
Munis are stronger this morning after a significant sell off yesterday.  Liquidity was scarce with very few bidders as munis followed the Tsy market.  A minimal amount of items out for the bid actually traded as both dealers and accounts delay taking losses.  We continue to see large amounts of Chicago and various other IL paper out for the bid as the market continues to use BWs as an evaluation system.   Today’s focus will be on the primary as we begin the retail order period for the week’s largest deal, $750mln Florida Citizens Property Insurance Corp.  We should see extremely strong demand for the name after two recent ratings upgrades.  30-day supply jumped this morning to $15.9bln versus at $13.84bln yesterday.

In credit news, Chicago has delayed their $380mln bond sale that was scheduled for today. The city still plans to issue bonds over the next few weeks, but has cited last week’s downgrades for the delay.  Chi paper sold off significantly after Moody’s downgrade, trading around a 6.10%, but has rallied back substantially over the past week and is currently trading around a 5.80%.

Puerto Rico GOs are unchanged this morning after rallying into the end of last week.  Benchmark GO 8’s of 2035 are currently trading around $81.50 (10.15%) versus almost 11% two weeks ago.  We should see GO debt stabilize here over the next week as we await more color on the upcoming July 1st PREPA payments.

30 Day visible supply: $15.9bln