Friday, Jan. 8, 2016

Corporate Bond Market
Decent tone to global equity markets to start this morning after a volatile week.  The PBOC ended their eight-day streak of Yuan devaluation giving investors a brief respite from the sell-off (DJIA Futures +126, SYP Fut +16 so far).  The payroll data due out at 8:30 this morning is likely to set the tone for the rest of the day’s trading.  Treasuries are selling off with the 10yr last at 2.165%.  Credit feels stronger with cash spreads 1-2bps tighter across the board.  The Investment Grade Index is -1.25 at 94.45/95.05.   We wouldn’t be surprised to see one or two issuers come to market given the firm tone. 

Not much to report in the way of market moving credit news.  In secondary trading we continue to see opportunistic buying of some of the oversold credits.  Clearly clients feel there are some bargains to be had in the front end IG space and there is a lot of demand for that part of the curve.  The hybrid sector has also proved remarkably resilient with better buying.  Energy remains under pressure, and the trade of the year is shaping up to be the ability to choose the winners from the losers in this beleaguered asset class. 

In economic news, Nonfarm Payrolls (8:30am), Unemployment Rate (8:30am), Change in Manufacturing Payrolls (8:30am), and Wholesale Inventories (10:00am) are due to be released today.


Municipal Bond Market
Munis rallied for the fourth straight day as the market continues to look towards Treasuries for demand.  The aggressive buying that we saw earlier in the week slowed slightly on Thursday with most market participants taking a step back.  We expect to see this same level of demand carry over into next week after $992mln in inflows this week.  30-day supply is stronger this morning $13.14bn scheduled vs. $10bn yesterday.

In PR news, AGM and Ambac have challenged the commonwealth’s decision to claw back highway revenue.  PR paper is unchanged in early trading, but this should certainly put pressure on GO debt.  Puerto Rico GO 8’s of 2035 traded lower on Thursday with bonds trading @ 71.875 (11.69%) yesterday after trading around $71 last week.

30-Day visible supply: $13.14bn


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