Friday, Jan. 15, 2016

Corporate Bond Market
Ahead of the long weekend we are seeing weakness across the board.  US Equity futures are down following another extremely weak session overseas (DJIA Fut -278 and S&P Fut -33).  The sell-off in Asian equities began in China after rumors circulated that Chinese banks had stopped accepting smaller listed companies as collateral.  The Hang Seng ended the day -1.5%, and European equities followed suit.  Oil is under pressure again at $29.50.  Treasuries are rallying, with the yield on the 10yr down below 2% again at 1.995%.   Corporate spreads are under pressure with better sellers across the board.   Cash is roughly 2-5bps wider, and the Investment Grade Index is +3.5 at 106.75/107.75.   

In credit news, Goldman Sachs has agreed to a $5bn fine for mortgage activity between 2005 and 2007.   More financial earnings hit the tape this morning.  Blackrock , Regions Financial, PNC, US Bancorp, Citigroup, and Wells Fargo all coming in right around eps expectations give or take a few cents on either side.  Given that it’s Friday ahead of a long weekend and there is significant equity instability, we would not expect any new issue in corporates.  Estimates for next week are $15-20bn. 

In economic news,  Retail Sales (8:30am), PPI Final Demand (8:30am), Empire State Manufacturing Survey (8:30), Industrial Production (9:15am), and University of Michigan Consumer Sentiment (10:00am) are due to be released today.


Municipal Bond Market
Munis are stronger this morning after another extremely light day in the secondary.  We continued to see strong demand in the primary as market participants continue to focus solely on new deals.  We continue to see new debt offerings oversubscribed during order periods and then trading unchanged once the deal breaks. 

Muni funds added $995mln in new cash for the week ended January 13th.  This should add to increased demand for next week's deals.  30-day supply is unchanged this morning with $8.53bn on tap over the next 30 days versus $8.5bn Thursday.


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