Wednesday, Jan. 20, 2016

Corporate Bond Market
There is significant pressure on global markets this morning after a tough overnight session in Europe and Asia.  The Hang Seng closed -3.82% and the Nikkei -3.71%.  In Europe , Euro Stoxx -3.28% and the FTSE -3.16% with the ECB set to meet tomorrow.   The follow on to US equity futures has the DJIA Fut -291 and the S&P Fut -35.   Further declines in oil seem to be weighing heavily on investors with WTI now at $27.49.   US Treasuries are rallying , the yield on the 10yr was last  1.97%.   In credit spreads are wider across the board.   The Investment Grade index is +3 at 113/113.5.  Cash spreads are anywhere from 2-20bps wider with Energy, Metals & Mining, and TMT the underperformers.  

Yesterday I saw some activity in the new issue market.  Wells Fargo priced a new fixed-for-life preferred at 5.7%.  There has been good retail demand for the paper as it has the DRD/QDI feature and there has been limited supply in the asset class.   Lloyds also successfully came to market with 3yr fixed and floating rate paper.  The real outperformer was Transco (WPZ) which printed a 7.85% 2026 issue.  It immediately traded up +1.5 points with better buyers.  There were rumors of a benchmark financial deal on tap for today but it is difficult to see them coming until we get a little equity stability. 

In economic news, MBA Mortgage Applications (7:00am), Housing Starts (8:30am), Building Permits (8:30am), and CPI MoM (8:30am) are due to be released today.
 

Municipal Bond Market
Munis are stronger this morning as the sector continues to look to Treasuries for direction.  Secondary trading was extremely light as the market geared up for this week’s $5.5bn in new issuance.  We continue to see the majority of market participants as better sellers during rallies like this as both customers and dealers use this as an opportunity to lighten up.  30-day supply is unchanged this morning with $9.5bn on tap over the next 30 days versus $9.5bn yesterday.

PR trading was light to start the week.  The market continues to wait for more color out of the legislature on the January 22nd PREPA deadline.  PR benchmark 8’s of 2035 continued to trade @ $71.00 (11.60%) on Monday after trading around the same level for most of last week.

30-Day visible supply: $9.5bn
 


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