Wednesday, Sept. 23, 2015

Corporate Bond Market
This morning European equities are higher as optimism is winning out over bad data in China with all indices up.  After a 179-point loss in the DJIA yesterday, futures are pointing for a upside opening (DJIA +51 and S&P +5).  Oil is up in early trading at $46.80/bbl, amid forecasts for a drop in crude US stockpiles.  Credit is slightly tighter this morning with the IG -1/282 ½-83.  US Treasuries are off with the 30yr at 2.956%.  The Volkswagen scandal has widened their bonds by at least 200bps.

Of note in corporate news, Bank of America shareholders voted to let Brian Moynihan remain as both Chairman and CEO.  RBS continues to shrink and announce that it will eliminate 100 jobs.

In the primary market yesterday it was a very quiet day with the only deal being Societe Generale’s perpetual junior subordinated fixed-to-floating deal with an 8% coupon for ten years and the floats at L+5.873%.  Rumor has it that there will be four benchmark financials and one industrial in the market today.

Economic data: MBA Mortgage Applications (7:00am) and Markit US Manufacturing PMI(9:45am).

 

Municipal Bond Market
Munis rallied Tuesday as the market continues to look towards Treasuries for direction.  We continued to see aggressive buying throughout the curve as buyers put money to work in both the secondary and new-issue market.  The largest deal of the ($1bln NYC TFA) was met with extremely strong demand.  NYC TFA 3.625% in 2039 priced @ 3.74%.  Smaller deals, such as $272 million Sacramento Public Finance Authority, were more than 10x oversubscribed in some maturities.  30-day supply is slightly stronger this morning with $7.0 billion on tap over the next 30 days, versus $6.7 billion yesterday.

In credit news, PREPA agreed to debt restructuring terms with its lines of credit lenders who originally extended lines of credit to support fuel purchases.  PR debt was unchanged after the announcement and we continue to see light trading across all PR credits.  Benchmark GO 8’s of 2035 continue to stabilize in the mid $70s with 2mm bonds trading @ $74.75 (11.195%).

30-Day visible supply: $7.0bn

 

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