Thursday, May 28, 2015

Municipal Bond Market
Munis are unchanged this morning after another strong performance yesterday.  Attention was on the primary with the pricing of the week’s two largest deals (PA GOs & Chicago GOs).  Chicago was met with extremely strong demand with $6bln in orders and some maturities almost 20x oversubscribed.  The spread on 10-year Chicago paper was 293bps compared to 145bps last time they came to market in 2014.  We have seen extremely strong demand for Chi paper in the secondary as bonds continue to rally off the lows after their downgrade to junk.  Focus will be back on the secondary today with the majority of the week’s new deals out of the way.  30-day supply is slightly lower this morning with $11.5bln on tap versus $13.4bln yesterday.

PR paper was mostly unchanged yesterday after rallying last week.  Benchmark GO 8’s of 2035 have started to stabilize around as $83.50 (9.90%) after trading as low as $77.125 (10.80%) in early May.  We should continue to see GO’s around this level as we approach the upcoming July PREPA payment.

30-Day visible supply: $11.5bln