Tuesday, Jan. 5, 2016

Corporate Bond Market
Stocks around the world declined for the second day, with both Europe and Asia down despite China’s efforts to prop up its market by having state controlled funds buying equities.  US futures are off (DJIA -1323 and S&P – 14.25) and gold advanced 0.4%, rising for the second consecutive day.  Oil is little changed this morning at $36.62/bbl.  US treasuries are up across the curve with the 10yr at 2.23%.  Credit is wider by 0.75bps at 90.75/91.75.

In corporate news, Shire is in advanced talks to acquire Baxalta for approximately $32bn in cash and stock, which is a 20% premium to where the stock was trading.  GM invested $500mln in Lyft, a bet that ride-sharing will be important to the auto market in the future.  VW’s stock fell the most in two months after the US government filed a lawsuit seeking penalties as high as $8bn.

There were no new issuance in the IG primary market yesterday.

Economic data: ISM (9:45am) and Wards Vehicle Sales.


Municipal Bond Market
Munis are stronger again this morning after rallying across the curve to start the year.  We continue to see aggressive buying from both dealers and customers who sat on the sidelines to end the year.  Demand will carry over into the primary with only about $3bn on the calendar this week. 30-day supply is unchanged this morning $8.2bn scheduled vs. $8.2bn yesterday.

PR paper is unchanged this morning after the commonwealth made interest payments on all January 1st payments, except for Infrastructure and Municipal finance authority debt.  We expect to see PR paper trade mostly unchanged for the next month until we receive more news regarding potential restructurings.   Puerto Rico GO 8’s of 2035 continue to trade around $73 (11.51%)  after trading around $71 last week.

30-Day visible supply: $8.2bn


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