Tuesday, Dec. 1, 2015

Corporate Bond Market
Global equities are mixed this morning as data suggests that the Euro regions labor markets  are improving.  In the US, after the S&P lost 78.57points yesterday, it appears that the market is going to open up this morning (DJIA +63 and S&P +7.25).  Credit is tighter this morning by 0.5 with the IG Index at 83.8/84.3.  US Treasuries are down this morning across the curve by 1 to 18 ticks with the 10yr at 2.234%.  Oil is up  $0.05 at $41.69/bbl.  The IMF added the yuan to its basket of reserve currencies, a move designed to help  liberalize the world’s second largest economy.

In corporate news, Morgan Stanley plans to eliminate hundreds of jobs from its currencies and debt divisions as the company believes the downturn in revenue will be permanent. The cuts could be as large as 25% across the bank’s fixed income division.

There were nine deals in the new-issue market yesterday as companies try to come to market in the three-week window between now and the Christmas holidays.  Names included Citizens Bank, Fibra Uno, Roper, Wells Fargo, Thermo Fisher, Pioneer Natural Resources, and Solvay Finance.  Whole Foods, in their first time to market, did $500mln 10yr at +300.

Economic data this morning is light with Markit US Mfg. PMI at 9:45am and Construction Spending and ISM Mfg. Prices paid at 10:00am.


Municipal Bond Market
Munis finished stronger on Monday with light trading in the secondary as the market awaits this week’s new issuance.  This week’s calendar is comprised of mostly smaller deals under $100mln which will bring some different names into the market place.  Muni funds reported $630mln in new cash last week versus $320mln during the prior week which should fuel additional demand in the primary. 30-day supply is stronger this morning with $11.42bn on tap over the next 30 days versus $6bn Friday.

We continue to see select demand for PR paper as December and January payments approach.  There has been extremely light volume over the past few days as the market braces for a potential default.  The most substantial default would be a missed payment on Commonwealth Guaranteed debt which could be serious pricing pressure on GO debt.

30-Day visible supply: $11.42bn


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