Monday, Jun. 15, 2015

Corporate Bond Market
Weak tone this morning after negotiations between Greece and their creditors fell apart.  Articles on the subject this morning are suggesting there remains a significant gap in what creditors are demanding and what Greece is willing to do.  Euro Stoxx off 1.5% and FTSE down .89% to start.  Asian equities are all in the red.   US equities are following suit with DJIA Fut -87 and S&P Fut -10.  The treasury market is rallying with the 10yr last at 2.363%.  Wednesday is the Fed meeting and rate announcement.  We are not expecting anything of consequence at this session.  Slow start for credit but would expect spreads to be at least 2-3bps wider.  The Investment Grade index is already +3 at 69.5/70.5.

Last week saw net outflows of $0.11bln in Corporate Investment Grade funds.  High Yield funds reported net outflows of $2.56bln.

The new issue market remains active with a deal for Cantor Fitzgerald priced on Friday at 6.5%.  That brings MTD total to $52bln, with an additional $25-30bln expected this week.   In credit news, CVS is making headlines with a $1.9bln purchase of Target Corp's pharmacies.  Should be a net positive for both credits.  GM is in the news , teaming up with Japan's Isuzu Motors to produce a new line of trucks.

On the economic data front: Empire Manufacturing (8:30am), Industrial Production (9:15am), TIC Flows (4:00pm) are due to be released today.


Municipal Bond Market
Munis are slightly stronger this morning after rallying Friday.  We continue to see demand in the secondary across the curve as buyers returned to the market at the end of last week.  Dealers still seems hesitant to mark up offerings against increased demand as most traders are still sitting on losses.  New issuance is expected to hit $6.72bln from a revised $7.3bln.  The largest deal of the week will be $750mln NYC TFAs with retail order period opening today.  30-day supply is unchanged this morning with $11bln scheduled over the next 30 days versus about the same level on Friday.

Muni funds reported fund outflows for the 6th straight week. Funds reported $411mln of outflows versus $380mln last week.  Outflow numbers of this size should not have much of an impact on the market.

PR paper remains extremely quiet as we approach the July 1st payments.  Volume in Benchmark GOs continues to be extremely light versus daily averages.  We are starting to see a little bit of a pullback in PR as the majority of buyers sit on the sidelines as they await more color.  Benchmark GOs traded @ $80.50 (10.32%) after trading around $83 (9.975%) last week.

30-Day visible supply: $11bln


Constant Maturity Swap Rates (CMS) 
2yr     0.974
5yr     1.833
10yr   2.438
30yr  2.860

30's-5's     1.027
30's-2's     1.886