Tuesday, Jun. 2, 2015

Municipal Bond Market
Munis are substantially weaker this morning, as the struggling treasury market pushed back muni bidders, thus keeping activity minimal.  Given a continuation of moderate primary supply and June reinvestment, however, munis hope to strengthen throughout the week.  New York expects to lead the new issuance market, with a JP Morgan released offering for a $616mln NYC GO (5s at 1.74% +29bps) in the primary market and NYC GOs trading inside +45bp spread in the secondary market.

Chicago bonds strengthened after Illinois cut $200mln from its required 2016 payment.  The average GO bond price maturing in 2040 increased 1.5% Monday to 91.7 cents on the dollar, pushing yield to its lowest since May 12 (5.6%). This may improve investor sentiment toward Chicago GOs.

In PR credit news, bonds traded near a two-month high, as creditors set meetings concerning the reconstruction of the island’s power utility debt. This meeting aimed to ease the junk-rated island’s financial crisis. Puerto Rico commonwealth securities maturing in 07/2035 traded at an average of 84.3 cents on the dollar.