Wednesday, Oct. 14, 2015

Corporate Bond Market
Global equities were lower overnight.  Chinese producer prices matched their biggest slump since the global financial crisis.  The Shanghai Composite finished the session -0.93%, with the Hang Seng following suit at off -0.71%.  The Nikkei traded down -1.89% and European stocks were down across the board.  There is still pressure on energy stocks as oil retreated again this morning, touching the lowest levels in four months.  Stateside, DJIA Fut +4 and SYP Fut +0.75 to start.  The 10yr yield was last at a 2.033%.  Credit is a touch better to start.  The Investment Grade Index is -0.25 at 83.5/84.  Cash spreads are probably unchanged to start.

In corporate news, Anheuser-Busch struck an agreement in principal to acquire its closest rival, SABMiller, for about $104 billion.  The deal will create a behemoth in the beer industry with about $64 billion in revenue.  GE agreed to sell the bulk of its US commercial lending and leasing business to Wells Fargo.  Earnings season it kicking off, with JPM reporting yesterday after the close and missing by a little.  This morning BOA beat and Wells Fargo matched its estimate for the quarter.

There were several deals in the new issue market yesterday ($11.75 billion), with the largest being Fidelity National’s three-tranche deal $3.75 billion deal (5, 7, and 10 yr).  BHP is in the market today with a benchmark hybrid , 60yr with a 5yr NC and a 60yr with a 10yr NC.  IPT is low 7% on the 10yr and a -50bps curve to the NC5.

On the economic data front: Retail Sales and  PPI final demand  (8:30am), Business Inventories (10:45am) and Beige Book (2:00pm) are due to be released today.


Municipal Bond Market
Munis are unchanged this morning after a mixed start to the week.  Volume was extremely light in the secondary as the market focused on the pricing of $937 million NY Dorms.  The deal was met with extremely strong demand and should set the tone the week’s $6.6 billion calendar.  Today’s new issuance will be highlighted by the opening of the retail order period for $1 billion LIPA bonds.  Buyers continue to have large amounts of cash to put to work which should create strong demand for the remainder of this week’s deals.  We expect to see secondary trading remain light here with accounts preferring to put money to work in the primary.  30-day supply is unchanged this morning with $10.87 billion on tap over the next 30 days versus $10 billion to start the week.

PR trading remains extremely light as the market awaits more news out of the commonwealth.  We continue to see PR paper drifting with very little direction, PR benchmark 8’s of 2035 traded yesterday @ $74.50 (11.23%) after trading around $75 (11.23%) last week.

30-Day visible supply: $10.7bn


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