Monday, Jan. 4, 2016

Corporate Bond Market
After a quiet, shortened holiday week, stocks have sold off today led by China’s CSI 300 Index of large capitalization companies fell 7%, setting off a circuit-breaker that suspended trading for the rest of the day.  European equities are all down across the board (Stoxx -3.22%, FTSE -2.46%).  Oil continues to trade below $40/bbl and is opening this morning at $37.47/bbl.  US Treasuries are up across the curve this morning with 10yr treasury at $2.225%.  Credit is wider by 3.5bps this morning with the IG Index at 91.75/92.75.

After almost two weeks of no new issuance in the primary IG market, a pipeline of deals totaling about $125bn in IG issuance is expected in January.

Economic data: Markit US Manf. PMI (9:45am), Construction Spending (10:00am), and ISM Manf. and Prices Paid (10:00am). 


Municipal Bond Market
Munis are stronger this morning after a lackluster performance to close out 2015.  We should see strong demand this week as buyers attempt to put money to work in the primary after almost two weeks of zero supply.  Muni offerings are significantly below the 30-day average (55,708), with only 41,860 offerings on TMC at the moment.  New issuance will bounce back this week with $3.3bn on tap.  The highlight of this week’s calendar is the pricing of $450mln University of Texas.  30-day supply is $8.2bn this morning.

In PR news, the commonwealth defaulted on $35.9mln in Infrastructure debt, while diverting revenue to make other payments.   Puerto Rico GO 8’s of 2035 jumped after the news with investors seeing the diversion of revenue as a positive sign for GO debt.  Bonds traded as high $73 (11.51%) on Thursday after trading around $71 earlier in the week.

30-Day visible supply: $8.3bn


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