Wednesday, Jan. 27, 2016

Corporate Bond Market
Equity futures are down to start this morning ahead of this afternoon’s FOMC Rate Decision (DJIA Fut -68, S&P Fut -8.5).  Global equities were mixed overnight.  Treasuries are selling off with the 10yr last at a 2.013%.  Commodity declines still weighing heavily on markets.  Oil is hovering around $30.70, after data showed US Stockpiles increased.  YoY decrease in crude is now 18%, and investors are anxious to see if the Fed will be adjusting its rate hike forecast to allow for this pressure.  Credit spreads are opening up unchanged.  The Investment Grade Index is marginally wider at 104.25/105.25 (+.25).

Earnings season continues to dominate the headline flow in Corporates.  Cliffs Natural Resources reports this morning, followed by an investor call at 10am.  RBS trading down this morning after announcing an unexpected $5.2bn charge to assets.   In the primary market, Citigroup priced a 6.3% $25 par preferred yesterday that was well received despite the increased issuance in this asset class of late, and US Bancorp priced a 3yr and a 5yr that are both trading better.  So far today, we are expecting at least two deals including a two-tranche deal from ANZ New Zealand. 

In economic news, MBA Mortgage Applications (7:00am), New Home Sales (10:00am), and the FOMC Rate Decision (2:00pm) are due to be released today.


Municipal Bond Market
Munis are mixed this morning after another quiet trading day in the secondary market.  We continue to very little flow as dealer positions continue to rise with very few outs.  Last week’s new deals still have balances remaining which should limit demand for the remaining deals of the week.  The highlight of today’s calendar is the weeks largest and most high profile deal, $750mln from the Chicago BOE.  30-day supply is unchanged this morning with $6.8bn on tap over the next 30 days versus $8.1bn on Monday.

PR trading remains extremely light as we head into the Friday meeting between the commonwealth and creditors.   Benchmark 8s traded @ $70.50 (11.93%) on Tuesday after trading around the same level on Monday. 

30-Day visible supply: $6.8bn



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