Monday, Nov. 16, 2015

Corporate Bond Market
The equity market has a firm tone to start this morning, despite the global unrest following Friday’s terrorist attacks in Paris (DJIA Fut +28, S&P Fut +5).  US treasuries are rallying with the 10yr last at 2.26%.  Gold and Oil are both trading up.  The Investment Grade Credit Index is unchanged from Friday at 85/86, having initially traded -0.5bp tighter as New York walked in.   

The heavy new-issue calendar that has dominated the price action in the credit market looks set to continue today.  Primary dealers are predicting $25-30 billion in issuance for the week, with many issuers looking to price ahead of the short holiday week next week.  So far we have seen Duke Energy, Florida Power and Light and Lockheed Martin announce deals. 

In credit specific news, Marriott is buying Starwood in a deal valued at $12.2 billion.  The deal will create the world’s largest hotel company.


Municipal Bond Market
Munis are unchanged this morning after rallying across the curve on Friday.  The market felt firmer for the first time in about a week as munis continue to look to Treasuries for direction.  The main focus this week will be the $9.4 billion in new issuance ($7 billion negotiated, $2.4 billion competitive).  It will be interesting to see how the market digests such a large calendar.  Funds continue to see inflows which would normally create substantial demand in the primary.  However, the market seems very hesitant buy munis here as most traders are still feeling the pain of the selloff.

We continue to see very few bidders on BW situations and extremely light secondary flow.  Muni funds reported inflows for the 6th straight week with $329 million in new cash flowing into funds.  30-day supply is weaker this morning with $11.9 billion on tap over the next 30 days versus $10 billion Friday.

PR trading remains nonexistent as the market waits on more color out of the Island.  We continue to see zero demand for any type of PR paper.   PR benchmark 8’s of 2035 traded @ $71.875 (11.67%) on Friday after trading around $72 (11.64%) earlier in the week.

30-Day visible supply: $11.9bn


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