Monday, Aug. 10, 2015

Corporate Bond Market
Firm tone in global equities this morning, buoying markets across the board.  Asian stocks trading up on speculation that the Chinese government will merge industrial companies.  European stocks are up on technology companies’ earnings and energy names’ rebounding in crude prices.  The follow through in the States so far has DJIA Fut +61 and S&P Fut +8.75. The Treasury market is selling off a bit with the yield on the 10yr last at 2.189%.  Credit is opening up unchanged to a touch better.  The Investment Grade Index is currently -¾ at 74.25/74.75.  Cash being quoted 1-2bps tighter to start.

The first week of August saw $17.45bn in new issuance in the corporate market out of an estimated $25bn.  Predictions for the month are still $60-70bn.   We would expect this week and the next to be active before the end of the summer slowdown.  So far this morning ING Bank has announced a benchmark 3yr and 5yr deal,  BNP has announced a T1 deal for later in the week.  MSCI Inc also on the tape with a 10yr Senior deal.

In credit news,  FCX filed an equity shelf for $1bn shares.  While there is no timing indicated for the offer it is clearly a credit positive.  FCX CDS trading 30-40bps better so far this morning. Alibaba also making headlines with a $4.6bn purchase of Suning Commerce Group and their network of electronics stores.  Lastly on the M&A front , Berkshire Hathaway is closing in on a deal to buy Precision Castparts, valued at $26.7bn.

On the economic data front:  Wholesale Inventories MoM (8/11), MBA Mortgage Applications (8/12), Retail Sales Advance MoM (8/13), and Initial Jobless Claims (8/13) are due to be released later this week.


Municipal Bond Market
Munis are weaker this morning after rallying to close out last week. Attention will be on the secondary for most of the week with only $5.5bn in new issuance scheduled.  The majority of this week’s calendar will be $1bn from the Kansas Development Authority. 30-day supply is slightly stronger this morning with $8.6bn on tap over the next 30 days versus $6bn on Friday.

Municipal funds reported their second week in a row of redemptions with $308mln in outflows.  Funds have seen outflows in 16/32 weeks this year.  HY specifically has been hit the hardest with the current turmoil in both Puerto Rico and Chicago.  HY funds this week reported $57mln in outflows. This week’s light new issue calendar should help offset the impact of this week’s outflow numbers.

We expect PR volume to be extremely light this week with very little news expected.   Liquidity continues to be extremely scarce in PR paper with only select credits seeing any kind of demand.  Benchmark GOs continue to stabilize right around a $70 dollar price, 2.5mm bonds traded Friday @ $70 (11.98%)

30-Day visible supply: $8.6bln