Friday, Jul. 17, 2015

Corporate Bond Market
Global equities are mixed this summer Friday.  Asian stocks are all up, bolstered by headlines that the China Securities Finance Corp is being empowered by the state to provide liquidity to the brokerage industry and support the equity markets.  Europe is off a touch as the Greek mess drags on.  Clearly even with a yes vote to the bailout package the possibility of a Greek exit is not eliminated (Euro Stoxx -.02%).   Stateside, DJIA Fut -10 and S&P Fut +.75.  Google is leading the charge after putting up massive earnings numbers after the close.  The stock traded up at least 12% on the follow.  The treasury market is unchanged for the most part with the 10yr last at 2.35%.  Oil is off, last trading at $50.80.  Credit is opening up with a firm tone.  The Investment Grade index is -.50 at 64.25/64.75 last.  The cash market is unchanged to -1bp after rallying yesterday.  Most of the buying we saw was in the long end of corporates with the treasury move.  On the run recent new issues in that part of the curve rallied 5-10bps.

We saw four large deals price yesterday,  Natl Australia Bank, Toronto Dominion, PNC, and Penske Truck Leasing.  All were oversubscribed and performed well on the break.  We are not expecting much to come today.  In credit news earnings continue with GE on the tape boosting earnings projections.  Suntrust also reporting good numbers.  On the fund flow front, Lipper reporting net inflows of 0.268bln to Corp Investment Grade funds for the week ended 7/15.  High yield funds reporting net inflows of $1.232bln. Economic Data:  Housing Starts, CPI and U of Mich all due out today.


Municipal Bond Market
Munis are unchanged this morning after rallying yesterday.  We saw strong demand in the primary with some of the weeks most highly anticipated deals pricing.  Tax exempts Chicago GOs 5’s of 2024 priced @ 5.09%.   MD GOs which are the benchmark used for the MMD scale priced right on top of the scale as expected.  We should see light demand in the secondary today with the majority of the weeks deals already priced.  30-day supply is stronger this morning with about $11.4bln on tap over the next 30 days versus $9bln yesterday.

Muni funds experienced outflows for the 11th straight week with $29.5mln in cash leaving funds versus $305mln last week.  The four-week moving average remains negative at -$409mln.  Interestingly, long term muni funds saw inflows of $34mln, after seeing demand mostly on the front end of the curve over the past few weeks.

PR paper did not show much of a reaction after missing a transfer yesterday.  PR Benchmark GO 8’s of 2035 rallied slightly with bonds trading as high as $73.25 (11.43%) yesterday compared to trading @ 72.75 (11.51%) earlier in the week.

30-Day visible supply: $11.4bln