Wednesday, Jan. 6, 2016

Corporate Bond Market
Another tough open for the market as a steep decline in global equities overnight puts pressure on US markets.  DJ Fut -267, S&P Fut -33.5 as New York walks in.  The weakness once again touched off in Asia when China devalued the Yuan and North Korea completed their first hydrogen bomb test.   Europe quickly followed suit with Euro SToxx down -1.67% and FTSE 100 down -1.76%.  Treasuries are rallying with the 10yr last at a 2.177%, down about 6bps, and commodities are lower with oil sliding below $35 a barrel and touching an 11-year low.   The market is forecasting that the US government data release on brent crude will show that stockpiles rose.  In credit the IG Index is currently +2.5 at 93/93.75.  Cash spreads are 2-5bps wider depending.

Yesterday marked a return to new issue for the corporate market, and issuers were not shy about bringing as much supply as tight as they could during the brief moment of equity stability.  The total was just under $16bn on the day across  8 transactions.   Citigroup priced a benchmark 10yr transaction 17bps tight of initial price talk at +148.  The bonds traded weaker almost immediately, last at 156/152.  Disney priced a four-part deal, Barclays, and Ford also came to market.  Harley Davidson priced 3yrs and 5yrs and actually outperformed a bit, trading a few better.  I am hearing that there are four or five issuers on tap for today if the market tone improves.  National Bank of Australia announced overnight a 3yr, 5yr and 10yr transaction. 

In secondary news, Apple is trading down on news they cut iPhone 6 production.  Valeant is also under pressure on news that they have hired an interim CEO.  Other market movers, Volkswagon reported sales down 9.1% in December. 

In economic news: MBA Mortgage Applications (7:00am), ADP Employment Change (8:15am), Trade Balance (8:30am), Factory Orders (10:00am), Durable Goods Orders (10:00am), and US Fed Minutes from the Dec. 15-16 FOMC Meeting (2:00pm) are due to be released today.


Municipal Bond Market
Munis are stronger again this morning for the third straight day as the market continues to put money to work with limited supply.  We should see extremely strong demand for new deals today with such limited offerings in the secondary.  Ratios remain unattractive at these levels; however, customers need to put money to work.  The highlight of today’s new issue calendar will be the pricing of $194mln in Princeton Healthcare System bonds, which should be met with extremely strong demand due to the limited options in NJ at the moment.  30-day supply is stronger this morning $9.4bn scheduled vs. $8.2bn yesterday.

PR paper is unchanged this morning after the commonwealth made interest payments on everything except for IFA and municipal finance authority debt.  Puerto Rico GO 8’s of 2035 continue to trade around $73 (11.51%) after trading around $71 last week.

30-Day visible supply: $9.4bn


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