Thrusday, Nov. 5, 2015

Corporate Bond Market
Markets overseas are up this morning with headlines that China’s government will be supportive of its economy.  Elsewhere in the region Societe Generale and Astazenca posted good results and rose 3.2%, which led Stoxx 600 higher (+.96%).  Stateside, we are higher to start, with DJIA Fut +68 and S&P Fut -8.75.  Oil is flat, near $46 per barrel, and commodities are lower with copper leading the way (-1.6%). Aluminum, lead, nickel and zinc also fell in London trading.  The Treasury market is lower this morningas Fed Chairman Yellen said raising interest rates in December was a “live possibility.”  The 10yr last at 2.230%.  Credit is weaker to start with the IG index +2.1 at 77.35/77.85. Cash spreads are unchanged to a touch wider.

Several companies announced job reductions.  Maersk is eliminating jobs and delaying or cancelling orders for new ships.  Kraft plans to cut 2,600 jobs as a result of  the recent merger.

It was another busy day for the new-issue market with IBM doing a benchmark 7yr.  Other names in the market were CMS Energy, Penske, Avalonbay, TransCanada Pipeline, and Ford Motor Credit, which did a 5yr and tapped a 10yr.

Economic data: Challenger Job Cuts YoY (7:30am); Claims, Nonfarm Productivity, and Labor Costs (8:30am); and Bloomberg Consumer Comfort (9:45am).

 

Municipal Bond Market
Primary issuance has led the focus for this week in munis.  Yesterday saw strong demand for the  roughly $300 million Los Angeles Airport (Aa3e/AA/AA) loan as non-AMT maturities saw repricing as much as 8bps lower in yield.  Also seeing strong interest was the $107 million Virginia Resources Authority Infrastructure Revenue bonds (Aaa/AAA/-), as maturities were priced 2-7bps lower from the initial order period. 

Secondary activity picked up compared to the start of the week as munis slightly outperformed Treasuries and buyers put funds to work at cheaper levels.  MMD/UST Ratios are lower in the front end of the curve while the long end is relatively unchanged as two, five, ten and thirty year ratios are at about 73%, 74%, 94% and 104%, respectively.

Trading in Puerto Rico remains relatively muted as investors continue to digest headlines coming from the island and remain wary.  PR 8% due 7/1/35 (CUSIP 74514LE86) traded yesterday between 72 3/8 and 73.

30-day visible supply dropped by almost $1 billion to $7.27 billion.

 

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