Monday, Jul. 13, 2015

Corporate Bond Market
Markets are all up this morning as Greece looks set to finally cave to creditor demands and strike a bailout deal with the ECB.  There is still some work to do, as PM Tsipras will still have to get further austerity measures passed in an unwilling parliament.  Global equities are reacting favorably this morning up across the board (Euro Stoxx +1.63%, DJIA Fut +117,  S&P Fut +14).  Commodities are mixed this morning, oil is off a touch at $52.32.  The treasury market is selling off across the curve with the 10yr treasury last at 2.459%.  Credit is tighter this morning, continuing Friday's rally, with the IG24 index 68.5/69 last.  Cash is 2-3bps tighter to start.

Last week we saw $27bln in new issuance, with Thursday's Charter Communications $15.5bln, 6-part deal being the most significant and active.  The deal was priced at attractive levels for investors and traded tighter almost immediately.  It remains active in the secondary this morning. There is an estimated $25-30bln on tap to price in the primary market this week.  A few of the deals that were postponed in last week's market volatility should be back on tap.  Hearing of at least one benchmark deal to be announced this morning.

For the week ended 07/08, net inflows of $1.093bln were reported for Corporate Investment Grade Funds, and net inflows of $.045bln were reported for High Yield Funds.  It's a light day for any significant credit news, with most investors focused on the macro picture in Greece and Puerto Rico.  Earnings heat up later this week with JNJ, JPM, and WFS due up tomorrow.  The rest of the bank and finance sector to follow later in the week which should set the tone.  No significant economic data today, though Retail Sales, PPI, Jobless Claims and CPI all out this week.


Municipal Bond Market
Munis are weaker again this morning after selling off Friday.  We should see extremely light volume today in the secondary as the market prepares for about $8.7bln supply.  This week’s calendar is highlighted by three deals larger than $1bln ($1.07bln Chicago GOs, $1bln Indiana Toll Roads, $1.1bln CA St Universities).  30-day supply is unchanged today with $9.5ln on tap over the next 30 days versus $9.8bln yesterday.

Muni funds reported outflows of $305mln versus $1.2bln last week.  Funds have seen outflows in 13 out of 28 weeks so far this year, bringing the four week moving average to negative $507mln.

Puerto Rico debt was unchanged to end the week.  We continue to see demand in the benchmark 8s with bonds trading as high as $70.375 (11.852%) versus to trading as low as $64(13.10%) two weeks ago.  We have seen the strongest demand from institutions in front insured paper with AGM paper at almost the same levels as a month ago.  PR officials and two authors from the Kruger report will meet with bond holders and bond insurers this afternoon.  Volume should be light in non insured PR paper until after the meeting.

30-Day visible supply: $9.5bln