Wednesday, Oct. 7, 2015

Corporate Bond Market
Stocks worldwide are up this morning as oil approaches $50 per barrel for the first time since July and is trading at $49.46/bbl.  The US equity market eked out a small gain yesterday and looks to open up this morning with futures in the green (DJIA+109 and S&P +13).  Commodities and emerging markets have surged since the end of the third quarter as it appears that the Fed will hold off raising interest rates.  Credit continues to improve with spreads tighter by 1.35 basis point this morning and the IG index is 86.15/87.56.  US treasuries are down this morning with the ten year at 2.063%.

SABMiller gained 1.1% and Anheuser-Busch climbed 2% as Bud raised its offer for the UK company to $104 billion.  SAB has rejected two earlier proposals.  The offer is cash and stock. An indication that credit conditions are tightening, GS and JPM are having difficulty in selling $1.2 billion of loans backing the leverage buyout of online clothing retailer Fullbeauty Brands.

It was quiet day for new issues with only two deals in the market.  Rolls-Royce came with their fist USD dollar deal, issuing $1 billion 10yr and $500 million 5yr at + 160 and +105.  Royal Bank of Canada did a covered bond with a five-year maturity at +78.

Economic data: MBA Mortgage Applications (7:00am), Consumer Credit (3:00 pm).

 

Municipal Bond Market
Munis are weaker this morning after a mixed trading day yesterday. We saw extremely light volume in the secondary as buyers put money to work in the primary.  The combination of such a large calendar and outflows from funds put pressure on the front end of the curve as buyers raised cash to put to work in new deals.  Attention will remain on the primary today with the pricing of $2 billion Chicago O’Hare Airport bonds.  The deal is expected to be extremely well received and should provide a little extra yield due to all of the negative press in Chicago.  30-day supply is weaker this morning with $13 billion on tap over the next 30 days versus $14.9 billion Tuesday.

PR trading remains extremely light as we continue to see very little trading and few items out for the bid.  We should continue to see PR trade sideways until more information comes out of the island.  PR benchmark 8’s of 2035 traded yesterday @ $75.00 (11.15%) after trading around $74.50 (11.23%).

30-Day visible supply: $13bn

 

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