Tuesday, Jul. 7, 2015

Corporate Bond Market
There is a decidedly firmer tone to the market this morning as Greece resumes last ditch efforts to stay in the Euro Zone.  An exit seems likely but not inevitable at this point and the region seems committed to putting in place an orderly process if that is in fact the outcome. European stocks are off marginally (Euro Stoxx -0.74%), whereas stateside equity futures are up (DJIA Fut +42,  S&P Fut +5.75).  The treasury market is rallying this morning, with yield on the 10yr last 2.235%, and credit is opening unchanged with the investment grade index 71.5/72.  The exception is the metals/mining sector,  which has been hard hit by the strong sell off in commodities.  Copper is off -2.5% and Iron Ore is off -5% while trading below $50 for the first time in a while.  The frequently traded names in the sector are between 10-25bps wider to start, after trading 10-20bps wider yesterday as well. This includes FCX, TCKBCN, and CLF.

Secondary flows were light yesterday coming back from the holiday weekend.  We remain active the AGO 10yr bonds which are 25bps tighter from the wides.  They are still +50bps from pre-PR headline trading levels.  There was no primary activityyesterday with the turmoil in the markets.  If we get some stability today we would expect to see a few index deals.   No significant economic data today.


Municipal Bond Market
Munis are stronger again this morning after firming up to start the week.  The market continues to look to US Treasuries for direction; however, volume remains extremely light.  We saw a substantial amount of items out for the bid specifically in CA and PR with very few items actually trading.  Attention will shift to the primary today as this week’s deals begin to price.  The calendar is highlighted today by $38mln Tampa GOs and $10mln Northern Illinois University.  30-day supply is stronger today with $12.7ln on tap over the next 30 days versus $10bln yesterday.

Puerto Rico debt continues to firm up after selling off hard early last week.  We saw light volume in insured paper to start the week with the majority of trading in non insured names.   Benchmark 8’s of 2035 traded as high as $71 (11.8%) versus to trading as low as $64(13.10%) on Monday.

30-Day visible supply: $12.7bln