Friday, May 1, 2015

Municipal Bond Market
Munis were weaker again as we continue to see limited liquidity.  Secondary flow remains light as we continue to see a substantial amount of items out for the bid with very few transactions.  New issue looks to bounce back next week with around $8bln on tap compared to $4.5bln this week.   30-day supply jumped this morning to $12bln after averaging about $8bln over the past few days.

Muni funds recorded a second straight week of inflows with $481.3mln in new cash.  We have seen decent inflow numbers over the past two weeks after three straight weeks of out flow.  We continue to see huge demand for both new issue and HY paper as buyers have cash to put to work.

PR benchmarks GOs were significantly weaker yesterday after legislators rejected an overhaul of PRs tax system. Bonds traded as low as $77.125 (10.80%) immediately after the announcement and rebounded slightly to $78.125 (10.65%) by end of day.  In credit news, PREPA hired Goldman as a potential underwriter on a possible financing deal.  Any additional liquidity is credit positive for both PREPA and GO debt and should give the common wealth a little bit of flexibility if they can get the deal done.

30 Day visible supply: $12.00bln