Tuesday, Jun. 9, 2015

Corporate Bond Market
Equity futures are down this morning following the weak tone set in Asia and Europe overnight.  DJIA Fut -15,  S&P Fut -2.   The treasury market is holding steady in yesterday’s trading range, with the 10yr note last yielding 2.399%.   Oil is higher on forecasts of less U.S. shale production, last at $59.10.  The credit market also feels weaker to start.   The Investment Grade index is +.25 at 68.25/68.75.  Cash spreads are opening up 1-3bps wider.    Yesterday’s supply in the corporate market was well received with the Exelon Corp and Dun & Bradstreet deals both trading well with significant follow on demand.    So far this morning we have seen new deals announced from Southern Co,  Reynolds American, and Dominion Resources.

In headlines, HSBC is on the tape cutting 50k jobs and reducing expenses as they revamp their business toward more profitability in a tough rate environment.  GE is also in the news , selling its U.S. private-equity lending business to Canada Pension for $12bln.   Greece remains in the news submitting a new proposal to creditors in an attempt to unlock bailout funds.  Their deadline remains three weeks out and we expect more noise ahead of that.   Quiet today on the economic data front , Wholesale Inventories due out at 10am.


Municipal Bond Market
Munis are slightly stronger this morning after firming up yesterday.  Attention will be on the primary today with the pricing of the week’s largest deal, $1.3bln GA GOs.  The GA deal should be a good indication for the markets appetite for new issue after last week’s substantial selloff.  We expect to see weak demand in the secondary as the majority of traders sit with losses due to recent volatility.  30-day supply is around $12.5bln which is right around the yearly average.

Munis recorded their second straight month of negative returns with a 0.34% drop in May versus losses of 0.50% in April.  We continue to see pressure on the muni market as funds continue to see outflows against above average new issuance.

PR paper has been extremely quiet as we approach the July 1st payments.  PR Benchmark GO 8’s of 2035 remain mostly unchanged and continue to stabilize around $83.00 (9.95%), after trading as low as $77.125 (10.80%) in early May.  Volume was extremely light on Monday with only two trades in the cusip.

30-Day visible supply: $12.5bln

UST 10yr 2.381%