Tuesday, Jan. 26, 2016

Corporate Bond Market
Equity futures have finally made their way into the green, buoyed by a rebound in the price of oil which is now back above $30 per barrel (DJIA Fut +56, S&P Fut +7.5).  There was a mixed session overnight in Asia and Europe.   The treasury market is also mixed, with the yield on the 10yr last at 2.012%.  Credit feels fairly well bid this morning; the Investment Grade Index is -1.25 at 105/106.  Cash spreads are unchanged to slightly better.   Earnings continue to roll in with good numbers out of Dupont, Johnson & Johnson, and Corning, just to name a few.  Sprint also beat expectations, posting a smaller loss than originally anticipated and gaining subscribers in the process. 

Yesterday was fairly quiet in the new issue space.  Tyco Electronics priced a 10yr deal at +170 that was heavily oversubscribed.  Bonds traded about 10bps tighter in the secondary.  There was also a new $25 par preferred from Qwest (CTL).  That priced at 7% with strong retail demand.   WTD we have only seen $0.35bn out of an estimated $15-20bn. 

In economic news, FHFA House Price Index MoM (9:00am), Markit US Services PMI & Composite PMI (9:45am), and Consumer Confidence Index (10:00am) are due to be released today.  There is also a 2yr Treasury Note auction today, with 5yr notes tomorrow, and 7yr notes on Thursday.

Municipal Bond Market
Munis are mixed this morning after an extremely quiet trading day to start off the week.  We continue to see very little demand for bonds in the secondary as dealer inventories continue to rise and customers look to the primary to put money to work.  This week’s new issuance kicks off today with $270mln Nassau Counties, $239mln SF Airports, and $288mln Katy Texas which we expect see extremely strong demand.  30-day supply is unchanged this morning with $8.2bn on tap over the next 30 days versus $8.1bn on Monday.

PR trading started off the week extremely light with very few transactions across all credits.   We saw small trades in PREPA paper in the mid $50s after trading around the high $50s for much of last week.   Benchmark 8s traded @ $70.50 (11.93%) on Monday after trading around the same level for most of last week. 

30-Day visible supply: $8.2bn


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