Corporate Bond Market
After yesterday’s rout in global equities, this morning appears better with most of the European indices up. US equities were off between 1.92% and 3.04% yesterday depending on the index. This morning US futures are up with the DJIA +49 and S&P +7.75. US Treasuries erased yesterday’s advance this morning with the 10yr off 4/32’s at 2.11%. Credit spreads were higher (+3bps.) yesterday and are flat this morning at 92/93. Oil is up in early trading at $44.92/bbl.
Energy Transfer Partners, a large pipeline company, announced that it had agreed to acquire Williams Cos., another large pipeline, in a $32.6 billion deal that will create a massive US network of natural-gas pipeline. Shell announced that it was abandoning its $7 billion Arctic oil-exploration campaign after drilling one well with disappointing results.
It was an interesting day in the IG primary market yesterdaywhen three deals that had been launch early in the day were canceled/reduced. Bond market turmoil and a weak equity market were cited for the dampened investor demand for bonds. Santander and CBL pulled their deals and Westfield Properties cancelled the sale of 10yr bonds but did sell $1 billion in 5yr debt but at higher yields than initially expected. PPL Electric did a 30yr, Peco Energy came with a 10 year, both First Mortgage Bonds.
Economic data: Case Schiller (9:00am) and Consumer Confidence (10:00am).
Municipal Bond Market
Munis rallied as the market looked to Treasuries for direction. We saw selective buying as buyers prepare to put money to work in this week’s $6.9 billion in new issuance. We should continue to see buyers focus on the secondary today with the majority of new issuance slated for tomorrow. The largest deal pricing today will be $550 million CA PUB Works. 30-day supply is stronger this morning with $12.9 billion on tap over the next 30 days versus $7 billion Monday.
PR trading should be extremely light today due to the Senate Finance Committee hearing kicking off this morning. We continue to see a lack of offerings in GO and PREPA paper as the market awaits more information out of the island. Benchmark GO 8’s of 2035 continue to stabilize in the mid $70s with 2mm bonds trading @ $75.25(11.16%) versus trading @ 74.75 (11.195%) early last week.
30-Day visible supply: $12.89bn
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