Monday, Aug. 3, 2015

Corporate Bond Market
Markets are mixed this morning with a slew of headlines pushing things around.  European stocks are mixed.  Greece is back in the headlines as the stock market reopens after a five-week suspension to aggressive selling.  The benchmark index was off 23%, further straining the already beleaguered economy,  and renewing talk that they are not long of the Eurozone.  Elsewhere in the region HSBC posted good results, as did Heineken which led Stoxx 600 higher despite the Greek news.  Asian stocks are down again , Nikkei -.18%,  Hang Seng -.91%, as economic concerns in the region persist.  Stateside we are mixed to start with DJIA Fut +5, and S&P Fut -.75. Oil is leading commodities lower with Brent Crude down 1.9%.   The treasury market is mixed with the front end selling off and long end rallying, continuing the curve flattening trend of late.  The 10yr last 2.189%.  Credit a touch weaker to start.  The IG index is 70/70.5, cash spreads unchanged to a touch wider.  For the week ended 07/29,  Lipper reporting net outflows of $1.262bln for Corporate Investment Grade Funds while High Yield funds reported net outflows of $1.722bln.

Cliffs Natural Resources is on the tape this morning announcing a tender offer for its 3.95% 2018 senior notes.  The company is offering to purchase up to $100mln of the bonds at a tender offer of $55.  That is roughly 2-3pts above where they were last trading.  Earnings continue with AIG, Tenet Healthcare, and Scientific Games all due out later today.  Tyson Foods already reported a small miss as did NiSource Inc.   Diamond Offshore Drilling reported this morning with a big beat.

When all was said and done July saw $160bln of IG suppy in the primary market.  We closed out the month with a new COCO from UBS.  The 6.875% priced at par and traded up as high as $100.50 before settling back down.  We would expect a few deals to price today before the summer slowdown begins in earnest. On the economic data front,  Personal Income and Spending due out at 8:30am , as is PCE data.   ISM Manufacturing, Markit PMI both due at 10am.


Municipal Bond Market
Munis are unchanged this morning after a strong performance last Friday to close out last week.  New issue volume will hit $7.8bln this week, which should be the peak for a slow August. The largest deal of the week will be $923mln green bonds form the Central Pudget Sound Transit Authority.  Minnesota will dominate this week’s competitive calendar with five deals ranging from $7.2mln-$386mln in size. We expect the new issue market to bet with extremely strong demand.  30-day supply is slightly weaker this morning with $9.8bln on tap over the next 30 days versus 10.5bln on Friday.

Muni funds reversed last week’s inflows with $73.3mln in outflows.  This brings July net outflows to $1.5bln.

PR trading was extremely light as we approached August 1st payment.   Benchmark GO 8’s of 2035 continue to trade below $70.  5000m traded @ 69.75 (69.625%) after trading as high as $71.25 (11.80%) on Monday.  PR trading should be extremely light as the market waits to see if PR will make the $58mln payment on Public Finance Corp debt.

30-Day visible supply: $9.6bln