Wednesday, Nov. 4, 2015

Corporate Bond Market
Global equities are higher across the board today after the ECB president said that policy makers would consider adding more stimulus at their next meeting and after China unveiled its five-year plan to bolster its economy (Stoxx +.70% and Hang Seng+2.25%).  US stocks were up yesterday and futures are opening higher this morning (DJIA +26 and S&P +2.50).  Credit is slightly tighter at the open, with the IG Index -0.35 74.9/75.4.  US treasuries are up this morning across the board by 2 to 7 ticks, with the ten-year at 2.198%.  Oil is up $0.26 at $48.14/bbl.

VW said its emissions testing scandal has widened beyond what was originally reported and has disclosed that the cost to fix the vehicles will surpass $2 billion. Tesla Motors stock rose 8% in premarket trading after reiterating its 2015 vehicle delivery target.

There were a few deals in the new issue market yesterday.  Arizona Public Service 30yr, Public Service E&G 30yr, Huntington Bank 3yr, and McCormick 10yr.  All were a couple of basis points better in secondary trading with HBAN as the leader, being offered this morning at +104 after coming at +115.

Economic data: MBA Mtge Applications (7:00am), ADP Employment Change (8:15am), Trade Balance (8:30am), AM Markit US Composite/Services PMI (9:45am), and ISM Non-Mfg. Composite (10:00am).


Municipal Bond Market
Munis continue to weaken as the market looks towards Treasuries for direction.  The market continues to face pressure, even as large sums of cash sit on the sidelines.  Pressure continues to build in the secondary market with very few items trading due to weak bids.  We expect to see the market focus on the primary until we start to see the secondary adjust to current pricing levels.  30-day supply is weaker this morning with $8.2 billion on tap over the next 30 days versus $10 billion Tuesday.

PR trading remains nonexistent as the market waits on more color out of the Island on the terms of a PREPA restructuring.   It continues to be extremely difficult to get any kind of bid on PR paper until we get more clarity out of the commonwealth.   PR benchmark 8’s of 2035 traded @ $72.625 (11.55%) on Friday after trading around $73 (11.48%) early last week.

30-Day visible supply: $8.2bn


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