Tuesday, Jul. 28, 2015

Corporate Bond Market
What a difference a day makes....Global equities are looking brighter with European stocks all up on various takeover headlines (Euro Stoxx +1.34%).  The Hang Seng is up +.62%, though the Shanghai continues to trade down.  Stateside equity futures are up (DJIA Fut +74, S&P Fut +10) ahead of today's consumer confidence data and Wednesday's Fed meeting.  The firm tone is following through into the credit markets.  Cash is unchanged to 3bps tighter depending on the sector.  The Investment Grade Index is -1 at 72/72.50.  The metals and mining sector is finally seeing some much needed relief.  Iron ore is finally up 2%+ overnight, copper has found some relief, and gold prices continue their consolidation today.  The active names in the space are anywhere from 1-20bps tighter.  We remain active in MTNA, CHK, AA, FMGAU, and X.  Earnings season rolls on with strong numbers out of Merck, Pfizer, Ford Motor, CIT Corning , and Textron so far and still a number of large companies to report.

The new issue calendar yesterday was dominated by a 10yr deal from Bank of America that priced at +167.  It is trading 2bps better this morning at 165/163 last.   There was also a new $25 par pfd deal from Schwab.  They priced a 6% fixed for life deal that traded up in the gray and we would expect further follow through buying this morning as it's now priced.  No deals yet this morning but we would expect a few as the morning rolls on.

On the economic data front:  Case-Shiller at 9am, Consumer Confidence at 10am.


Municipal Bond Market
Munis are unchanged this morning after an extremely strong performance to start the week.  We saw buying throughout the curve in the secondary as buyers put money to work right out of the gates with not much new issue to wait for later in the week.  Today will be one of the more active days in the primary with the pricing of $290mln VA GOs and $256mln Dallas Fort Worths.  August 1st is a very large redemption date for Texas paper so we should see the Fort Worth deal oversubscribed. 30-day supply is most unchanged this morning with $11.9bln on tap over the next 30 days versus $11.7bln yesterday.

In credit news, PR announced that it would not make an August payment on their Public Finance Authority debt.   Benchmark GO 8’s of 2035 held in after the announcement with bonds trading @ $70.50 (11.90%) after trading around $71.25 (11.80%) late last week.  We saw an above average amount of non insured Puerto Rico items out for the bid very few items actually trading.

30-Day visible supply: $11.9bln