Monday, January 11, 2016

Corporate Bond Market
Stateside equity futures are up to start the session (DJIA Fut +70, S&P Fut +10).  This follows a strong session overnight in Europe that saw Euro Stoxx up +.75%, and the FTSE up +.14%.  Treasuries are selling off slightly, pushing yields up and bringing the 10yr to a 2.156%.  Commodities continue to trade down with oil last at $32.75.   Credit feels unchanged with a decent tone after a significant amount of supply hit the tape on Friday.   The Investment Grade Index is currently -2 at 96.5/97.5.  Cash spreads are pretty much unchanged across the board, except for some weakness in the Energy Sector. 

There are two big market moving headlines this morning.   First, Kohls (KSS) has reported they are considering going private or breaking up the company.  Shares are down 40% on the story.  It is our preliminary understanding that most of the bonds have CoC language.  Elsewhere Shire has announced it is combining with Baxalta in a deal valued around $32bn. 

Following the spate of deals that came Friday, issuance numbers MTD are at $28bn out of an estimated $110-120bn.   The outperformers were the new American Tower deal, the Simon Property Group deal and the Boston Properties deal.  Hearing there are at least two potential benchmark transactions looking to price today. 

In economic news,  Labor Market Conditions Index(10:00am) is due to be released today.


Municipal Bond Market
Munis are slightly weaker this morning after mixed trading to close out the week.  New issuance will return to the average levels that we saw for most of 2015 with $8.3bn scheduled.  This week’s calendar will be highlighted by two large deals out of Illinois as the City of Chicago and the State of Illinois come to market with about $1bn in debt.  The muni market is in desperate need of supply as accounts sit with a substantial amount of on hand while continuing to face inflows.  Muni funds reported inflows of new cash for the 14th straight week with $1.2bn flowing into funds.  30-day supply is unchanged this morning $13.2bn scheduled vs. $13.10bn Friday.

PR trading remains quiet as insures begin to face off with the commonwealth over the legality of claw backs.  GOs were the biggest winners from the claw backs as money was used to support GO debt.  Puerto Rico GO 8’s of 2035 traded as low as $72 on Friday (11.67%) after trading around $73 earlier in the week.

30-Day visible supply: $13.2bn