Thursday, Jan. 21, 2016

Corporate Bond Market
Firmer tone to start the session with equity futures up across the board (DJIA Fut +80, S&P Fut +12.5).  European stocks are all trading up after the ECB kept rates unchanged and committed to ramping up economic stimulus in March.  Asian equities are all up as well.  Oil is marginally better at $28.30, and the yield on the 10yr treasury is currently 1.97%.  After initially trading 1-2 weaker, the Investment Grade index is now -2.5 at 108.5/109.5.  Cash spreads seem to be unchanged to a couple bps better, and the hybrid/pfd market is up 0.25 to 0.50.  High beta energy names seem to be rebounding off the lows as well. 

Negative headlines out of Deutsche Bank, whose Q4 numbers will be severely impacted by litigation charges,  and out of Barclays who announced more layoffs, should be weighing on the financial sector more than they are.  Overnight there was Asian real money buying of US and Yankee bank bonds – particularly in the long end.  Also important to note that the WFC 5.7% pfd that they priced on Tuesday has hung in extremely well despite the equity volatility.  This morning it is 24.79/ bid without , having not dipped below 24.73 yesterday despite equities being off 500+ pts.  We still look for this asset class to outperform.

In economic news,  Initial Jobless Claims(8:30am), Continuing Claims (8:30am), and Bloomberg Consumer Comfort (9:45am) are due to be released today.


Municipal Bond Market
Munis are stronger again this morning as the market continues to look towards Treasuries for direction.  We continue to see very weak demand in the secondary market as both customers and dealers look to the primary for bonds.  In credit news, the Chicago Board of Education faced downward price pressure in secondary trading after Illinois republicans suggested bankruptcy as a potential option for the district.   The latest headlines out of Chicago should delay any potential new deal for the school district. 30-day supply is unchanged this morning with $8.17bn on tap over the next 30 days versus $9.5bn yesterday.

PR trading remains light as prices continue to trend lower due to minimal demand.  PR benchmark 8’s of 2035 broke $70 for the first time in months with bonds trading@ $69.50 (12.11%) on Wednesday after trading in the low $70s for most of last week.

30-Day visible supply: $8.17bln


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