Wednesday, May 20, 2015

Municipal Bond Market
Munis are stronger this morning after trading weaker yet again yesterday.  We saw a substantial amount of selling to start the day, however, secondary volume dried up in afternoon trading.  Focus was mostly on the primary market with the pricing of $453mln NYC waters.  NYC Waters 5’s of 2026 priced slightly wider @ 2.91% (+35bps) versus pricing +32bps in Februarys deal.   Today’s focus will be on the primary yet again as we start to wrap of new issuance ahead of the holiday weekend.  One of the more notable deals of the day will be the pricing of $160mln Nassau GOs with maturities ranging from 2017-2035.  30-day supply dropped this morning to $13.84bln versus $15.9bln at yesterday.

Muni trading volume fell 13% from the first quarter of last year, with volume falling to $618bln from $709bln a year ago.  We continue to see light trading in the secondary as the majority of cash on the sidelines flows directly into new issue leaving very little liquidity in the market.  This trend should carry over into the second quarter and we expect to see a similar decrease in volume.

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: $13.82bln