Tuesday, Sept. 1, 2015

Corporate Bond Market
An ugly start for global equities as concerns about global growth rear their head again, sending stocks into a tailspin and volatility soaring (DJIA Fut -321, S&P Fut -39.50).  Overseas Euro Stoxx is off -2.24%, the Nikkei is down -3.84% and the Hang Seng -2.24%.  The sell off was triggered by weak Chinese manufacturing numbers and snowballed from there.  The subsequent flight to quality has the 10yr treasury at 2.168%.  Oil last trading at $47.83, off a bit from yesterday's high.   Credit trading down as expected.  The Investment Grade Index is 2.25 at 83.50/84.25.  It's tough to pin down cash at this point with little trading yet, but early indications are +3-8bps wider. Liquidity feels thin heading into the holiday weekend which may put additional pressure on beleaguered markets.

The primary market remains quiet, despite calls for $5bln in new issuance due this week.   It will be difficult for anything to get done until we get some stability.  In credit news,  Apple and Cisco have announced a partnership on Mobile and Corporate Network Devices.

On the economic data front: the Markit US Manufacturing PMI (9:45 am), Construction Spending MoM (10:00 am), and ISM Manufacturing (10:00 am) are due to be released today.


Municipal Bond Market
Munis are stronger this morning after a mixed trading day to start the week.  We expect to see the market focus on the primary this morning with the beginning of the retail order period for the week’s largest deal, $1bln NY Dorms.  Buyers were active on the front end of the curve yesterday and we expect to see demand carry over to today.  30-day supply is slightly stronger this morning with $7.1bln on tap over the next 30 days versus $6bln Monday.

PR volume remains extremely light as the market awaits any kind of news out of Puerto Rico.  We continue to see few items out for the bid and very little trading in all PR credits.  PR Benchmark 8’s of 2035 saw only two trades greater than 1mm on Monday with 5mm trading @ $72.25 (11.60%).

30-Day visible supply: $7.1bln


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