Wednesday, Jan. 13, 2016

Corporate Bond Market
Firm tone to credit markets this morning despite a heavy new-issue calendar.  Most sectors are opening unchanged to slightly better and the Investment Grade Index is -1.5 at 96.75/97.75 last.  The much anticipated AB InBev deal was announced this morning, and it looks like they are planning to print $30bn.  The initial price talk looks to be attractive at a discount to outstandings.  The maturities will be 3yr, 5yr, 7yr, 10yr, 20yr, and 30yr.   Global equities are all up this morning with Asia rebounding nicely and Euro Stoxx +1.36%.  Treasuries are selling off slightly with the 10yr last at a 2.12% (-6bps on the week).   Oil remains under pressure at $31.15. 

Quiet day on the earnings front before the financials really start to come in which should mean more issuance.  JP Morgan kicks it off with their pre-market release tomorrow morning.  Away from the monster ABIBB deal there is also a deal from NIPLIF, the Japanese Life Insurer.   They are printing a 30nc10yr deal at 5% talk.  It should see good demand out of Asia and perform well at these levels.   This sub fin space continues to perform well with the new Credit Agricole 8.125% trading about a point higher with better buyers.  We were also active in a new preferred issue yesterday from PSA (Public Storage).  They priced a 5.4%, $25 par which looks to be trading around par this morning. 

The only sectors that continue to struggle are energy and metals and mining.  There will be little respite without a strong rebound in commodities.  In economic news, MBA Mortgage Applications (7:00am), Monthly Budget Statement (2:00pm), and the US Fed beige book (2:00pm) are due to be released today.


Municipal Bond Market
Munis are weaker this morning after an extremely quiet trading day Tuesday.  Secondary trading was nonexistent as the market focused exclusively on the primary market as we began retail order periods for some of the week’s largest deals.  We expect to see the same situation here this morning as the market awaits allocations from yesterday’s deals.  30-day supply is weaker this morning with $8.11bn on tap over the next 30 days versus $12bn Tuesday.

PR trading remains nonexistent as the market waits on more color out of the Island.  We continue to see very light demand for any type of PR paper.   At this point, customers have built their position and are now preparing for restructuring talks.  PR benchmark 8’s of 2035 traded @ $72.50 (11.56%) on Tuesday after trading around $71.75 (11.68%) on Friday.

30-Day visible supply: $8.5bn