Monday, Sept. 28, 2015

Corporate Bond Market
China is in the news this morning as profits at Chinese industrial companies dropped 8.8% in August year-over-year.  European stocksare off in today’s trading.  It looks like it will spill over to the US equity markets as futures are down (DJIA -78 and S&P 9.50).  Oil is off this morning for the first time in three days, down $.90 to $44.83/bbl.  US Treasuries are up in early trading with the 10yr at 2.129%.  Credit feels unchanged this morning.

In corporate news this morning, Alcoa has announced that it will split itself into two public companies.  One will keep the Alcoa name and will control the bauxite mines, the raw material for aluminum.  It is expected that this company will hold the existing bonds and will have a high non-investment grade rating.  The second company will focus on high-technology products and seek an investment grade rating.

Expecting a strong week in primary issuance with another $30+ billion in issuance. Nothing yet this morning.

Economic data: 8:30 am Personal Income, Spending, Deflator, Core MoM, Yoy; 10:00 amPending Home Sales; and 10:30 am Dallas Fed Mfg. activity.


Municipal Bond Market
Munis were mixed on light trading to close out the week.  We saw some aggressive buying in the 5-year range but very little demand further out on the curve.  Attention this week will shift to the primary market with one of the largest calendars we have seen over the past few weeks at $6.9bn scheduled.  This week’s calendar is comprised of 18 deals larger than $100 million with Washington St leading the way with a $980 million dollar deal.  We expect to see strong demand in both the primary and the secondary with muni funds reporting inflows for the first time in 5 weeks with $233 million flowing into funds.  30-day supply is weaker this morning with $7.9 billion on tap over the next 30 days versus $9 billion Friday.

PR trading remains extremely light as the market awaits more news out of the commonwealth.  We continue to see a lack of offerings in GO and PREPA as bonds continue to creep higher.  Benchmark GO 8’s of 2035 continue to stabilize in the mid $70s with 5mm bonds trading @ $75.50(11.07%) versus trading @ 74.75 (11.195%) early last week.

30-Day visible supply: $7.9bn 


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