Tuesday, Jun. 16, 2015

Corporate Bond Market
Another tough session for overseas equities overnight, a trend we expect to continue until we get some clarity out of Greece and the euro zone: Euro Stoxx off -.58%,  Nikkei -.64%. Stateside equity futures are following suit with the DJIA -30 and S&P -4.  The Fed begins its two-day meeting today with a rate announcement due out tomorrow.  Treasuries continue to rally with the 10yr yield last at 2.322%, which is still well within recent trading range.  Oil is holding steady at $59.95 last.  Credit poised for another weak session on low volumes.  IG is +0 at 69¾/70¼.  We have seen better sellers of most asset classes.  There is not a lot of secondary liquidity heading into quarter end and the sellers are feeling the squeeze. This sentiment was echoed by headlines this morning that Jefferies trading revenues are down over 30%. The new issue calendar was light yesterday and we've only heard of one or two potential deals today.  We believe there is an opportunity to pick up some cheap paper in here, but it's not a trade for the faint hearted.

In credit headlines, not a lot to report this morning.   There is some noise around consolidation in the HMO space which could affect names like HUM, UNH, AET, and CI.  Starwood is planning to list its timeshare unit, Vistana, on the NYSE by year-end.  Toyota announced a share buyback.  Nothing significantly market moving.

On the economic data front,  Housing Starts and Building Permits will be released today at 8:30 AM, Citi forecasts 1,125K May housing starts and 1,100K building permits.


Municipal Bond Market
Munis are stronger again this morning after firming up to start the week.  We continue to see extremely strong demand in the secondary, specifically in the IG space within 15 years.  Monday kicked off the two-day retail order period for the week’s largest deal ($750mln NYC TFAs).  TFA 4’s of 2044 were priced to yield 4.029% and will price for institutions on Wednesday.  Attention should be split between the primary and secondary as customers continue to put money to work.  30-day supply is smaller this morning with $12.6bln on tap versus about $14bln yesterday.

PR debt continues to be extremely quiet.  Volume in PR Benchmark GO 8’s of 2035 remains light with very few trades.  Bonds are starting to trade below $80 (10.42%) after trading as high as $83.00 (9.95%) in early June.

30-Day visible supply: $14bln


Constant Maturity Swap Rates (CMS) 
2yr     0.955
5yr     1.806
10yr   2.405
30yr  2.828

30's-5's     1.022
30's-2's     1.873