Monday, Sept. 21, 2015

Corporate Bond Market
Global equity indices are mixed today with most European markets up and Asia indices down. Equity futures in the US are pointing to an opening on the upside (DJIA +104 and S&P +12.50).  On the fixed income front, interest rate futures now give a 20% chance of a move by December.  US treasuries are opening this morning on the downside with the 10 year down 10/32’s at 2.171%. Credit is better with IG spreads down 2 bps at 82/83.  Oil is up $1 this morning at $45.74/bbl.

Volkswagen lost almost a quarter of its market value after it admitted to cheating on US air pollution tests for years.  Over the weekend, Zurich Insurance Group abandoned a $5.6bn pound unsolicited bid to takeover RSA Insurance Group.

As is typical, there was no IG primary issuance on Friday, but $25-$30bn is expected this week as it was rumored that 4 deals were held back last week, including 2 industrials.  This morning UBS New Jersey(BBB+/A) announced a 5 yr/frn and 10yr fixed notes.

Economic data today is light with only existing homes at 10:00am.


Municipal Bond Market
Munis are weaker this morning after a strong close on Friday.  We continued to see aggressive buying throughout the curve as buyers put money to work after sitting on the sidelines for most of the week heading into last Thursday’s FOMC announcement.  Municipal new issuance will hit about $4bn this week highlighted by a $1bn NYC TFA deal.  Funds continue to face pressure from redemptions with $411mln leaving cash last week.  New issuance is light enough over the next few weeks that we should not see a huge impact from outflows. 30-day supply is slightly weaker this morning with $6.7bn on tap over the next 30 days versus $7.5bn Friday.

PR trading picked up on Friday with multiple trades in GO debt.  5mm PR benchmark 8’s of 2035 traded @ 75.25 (11.03%) late Friday after light volume for much of the week.   We expect to continue to see light trading in PR paper until more information comes out of the commonwealth on a PREPA restructuring.

30-Day visible supply: $6.7bn


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