Friday, May 22, 2015

Municipal Bond Market
Munis are slightly stronger this morning after rallying yesterday.  Attention was on the secondary for the first time this week with the majority of new issue deals wrapped up.  We continue to see strong demand in the front end with demand for pre-res and short-call paper.  Volume will be very light today heading into the holiday.  30-day supply is slightly weaker this morning with $12.2bln on tap versus $13.5bln at yesterday.

Muni funds recorded their third straight week of outflows with $91mln leaving funds.  The trend over the first half of the year has been inflow money flowing directly into the primary and supporting any new issue deals.  This should put some pressure on the primary over the next few weeks as we continue to see above average inflow numbers. 

In credit news, Puerto Rico legislators passed a bill that will raise the islands sales tax from 7.0% to 11.5%.  This is credit positive for all PR paper in the short term; however, the island still faces substantial challenges over the next few months.  PR benchmark GOs firmed up throughout the week and should continue to rally today with the passing of the bill.  Bonds traded as high as $82.425 (10.05) yesterday after trading as low as $77.125 (10.81%) at one point. 

30-Day visible supply: $12.20bln