Monday, Jun. 8, 2015

Corporate Bond Market
The tone in the markets feels mixed this morning as investors continue to digest Friday's payroll numbers and the outlook going forward.  Equities are down to start with DJIA Fut -5, S&P Fut -2, European stocks all in the red, and Asian equities mixed.  10yr Treasury last at 2.397%, and we continue to see pressure on emerging markets as Greek headlines persist.  Oil trading down at $58.54.  Credit seems to be opening up unchanged after trading 1-2bps tighter on Friday in light volume.  IG24 currently 66¾/67¼, unchanged.

In Corporate news,  Deutche Bank named a new CEO in John Cryan, who replaces current management at the end of the month.  DB equity up on the news.  Fresh off the recent acquisition of Sterne Agee, Stifel is making headlines by agreeing to buy Barlcays PLC's wealth management business in the US.  In the industrial space,  Syngenta/Monsanto headlines heating up as Monsanto proceeds with its unwanted takeover approach of Syngenta.  They have added a $2bln breakup fee to the proposal if they cannot obtain regulatory approval for the acquisition.

In the primary market we are expecting at least two deals today, with an estimate of $25-30bln for the week.  The recent GWW and PCP deals continue to see follow through demand from investors.  It is a light day for economic data with only Labor Market Conditions Index to be released (10am). 


Municipal Bond Market
Munis are slightly stronger this morning after trading weaker again on Friday.  Attention will be on the primary this week with about $7.3bln on tap.  The highlights of this week’s calendar are $1bln GA GOs & $534mln Miami Dade Aviation Revenue bonds.  30-day supply is larger this morning with $14bln scheduled versus about $9.7bln on Friday.

Muni funds reported outflows of $380mln versus $170mln during the previous week.  This number should put some additional pressure on the market after last week’s sell off.  

In PR credit news, PREPA creditors agreed to extend the forbearance agreement by two weeks.  This extension should not have much of an impact on PREPA debt as they continue to kick the can down the road as we approach the July payments.  PR Benchmark GO 8’s of 2035 remain mostly unchanged and continue to stabilize around as $83.00 (9.95%) after trading as low as $77.125 (10.80%) in early May.  Volume was extremely light on Friday with only 1000m benchmark GOs trading @ $83.25 (9.94%)

30-Day visible supply: $12.3bln

UST 10yr 2.400%