Tuesday, Jul. 14, 2015

Corporate Bond Market
Markets are opening up mixed this morning with Asian equities trading up and European stocks trading down.  Stateside equity futures are down small with the DJIA Fut -6 and S&P Fut -0.75.  Oil is trading down, last $51.35, as Iran makes headlines having reached a nuclear accord.  The treasury market is rallying with the yield on the 10yr last 2.439%.  Credit feels a little weaker to start.  Cash seems to be quoted +1-4bps across sectors.  The IG24 index is 68/68.5 (+.5).

The focus in the corporate market yesterday was the large $15bln, 6-part, deal from CVS.  They are trading 2-6bps tighter across the tranches. We saw the most demand for the 30yr on the break and heard from multiple accounts that allocations were very tough.  The recent Charter Communications deal continues to trade actively in the secondary, off the tights but still tighter than pricing save the 7yr and 10yr.  Today's calendar is already heating up with a new deal announced from Sumitomo,  3yr , 5yr and 10yr, and rumors of another benchmark financial to come. WTD we are at $15bln out of an estimated $25-30bln.

The earnings calendar rolls on with JNJ and JPM both reporting this morning and beating expectations.  Wells Fargo and Yum! Are due out later today.  In terms of economic data, Retail Sales (8:30 AM), Import Price Index (8:30 AM), and Business Inventories (10:00 AM) are due to be released today.


Municipal Bond Market
Munis are firmer this morning after trading slightly weaker to start the week.  Volume was extremely light in the secondary as the market awaits the weeks $8bln in new issuance.  We expect to see the market focused on the primary today with the pricing of $317mln San Antonio Electric and Gas bonds, $258mln Arizona School COPS, and $232mln Montgomery TX.   30-day supply is stronger this morning with $14.5ln on tap over the next 30 days versus $9.8bln yesterday.

Puerto Rico debt was quiet yesterday as buyers sat on the sidelines ahead of the islands meeting with creditors.  Benchmark 8’s of 2035 traded higher after the meeting with 2mm bonds trading @ 71.25 (11.76%).  Attendees left the meeting with very little clarity on a restructuring; however, creditors were told that PRASA should be able to meet all of its existing debt.  We saw a substantial amount of marked up PRASA offerings after the meeting along with a strong bid for any of the insured paper.

30-Day visible supply: $9.8bln