Thursday, Jul. 9, 2015

Corporate Bond Market
It's risk on this morning as global equities all trade up, commodities rebound, and credit trades tighter.  The firm tone is due at least in part to the strong rebound in Chinese equities.  The Shanghai Composite Index rallied 5.8%, bringing the rest of the region up with it.  For the moment, concerns over Greece seem to have faded into the background.  Euro Stoxx are up 2.26%.  Stateside DJIA Fut +147, S&P Fut up +20.  We are finally seeing some relief in the beleaguered commodities sector.  Iron Ore is up 10%, WTI up 1.3%, all of which should cause a little whipsaw action in the metals/mining and energy bonds that have taken such a beating this week.   US treasuries are selling off with the 10yr last at a 2.25%.  Credit appears to be 1-5bps tighter to start in general, with more buyers than sellers coming in first thing.  The Investment Grade Index is -2 at 71/71.5.

This morning's rally should encourage a few of the corporate issuers to come to market today, as they had been waiting in the wings for a firmer tone in which to tap investors.  Hearing at least three index deals lined up.  We have only seen about $8bln this month out of an expected $18bln so today could be a busy day.  Yesterday's primary activity was marked by the GM deal, pricing 5yrs @ +170 and 10yrs @ +210.  Trading was quiet last night but we are seeing better buyers 1-3bps tighter this morning.  Toyota also came to market yesterday, printing 3yrs and 7yrs.

Very light day in terms of credit news beyond the macro environment.   PepsiCo Inc and Walgreens both reported this morning beating expectations. On the economic data front:  Initial Jobless Claims (8:30 AM) and Bloomberg US Weekly Consumer Comfort Index (9:45 AM) are due to be released today.


Municipal Bond Market
Munis are weaker this morning after rallying for three straight days.  We continue to see extremely strong demand throughout the curve in both the secondary and primary markets.    Focus will be on the secondary today with a light day of new issuance scheduled. 30 day supply is weaker today with $9.8ln on tap over the next 30 days versus $12.bln yesterday.

Puerto Rico debt continues to strengthen after last week’s sell off.  We saw volume pick up in the benchmark 8s with bonds trading as high as $70.75 (11.852%) versus to trading as low as $64 (13.10%) last Monday.  All PR debt continues to strengthen with front insured paper almost at the same levels we saw a few weeks ago.

30-Day visible supply: $9.8bln