Monday, October 3, 2016

Corporate Bond Market

US Equity Futures are flat to start the week with the DJ Futures +3 and the S&P Futures -0.50. The global tone is mixed with overseas equities mixed through the overnight. Oil is up to $ 48.46/ barrel and rates are weaker with the 10yr Treasury last at 1.607%. Credit is wider with the Invest Grade Index showing 68.5/69.3 and cash is also weaker.

In credit news, September’s primary market saw $172.41bn priced in Investment Grade Credit and $27.085bn MTD in High Yield. This week is expected to bring $20bn in new issue IG Credit and there are 5 deals on the calendar worth $2bn so far in the High Yield space. Keep a look out for MUFG set to Tier 1 Perpetual Subordinated Bonds later today.  

In economic data, there are a couple of announcements scheduled for today. First, the Markit US Manufacturing PMI will be released this morning. Following, Census Bureau Monthly US Construction Spending will be reported. Finally, ISM Manufacturing PMI will be announced.

Municipal Bond Market

Munis are weaker again this morning after a light trading day on Friday.  The primary will be the focus of the muni market this week with about $14bln scheduled. Highlights of this week’s calendar include $1.5bln from Harvard University, $1.1bln from the NY Dorm Authority, and $766mln from Banner Health.  Such a large calendar will certainly put pressure on the secondary.  The market has felt extremely fragile over the past week and a large calendar should put the level of demand to the test.    Supply is stronger this morning with $19.5bln on tap over the next 30 days versus $116bln on Friday.

PR trading remains light with the market only focusing on select PR credits.  Demand remains weak for GOs with very little liquidity outside of the most active cusips.   We continue to see strong demand for COFINA senior & sub paper and PRASA debt.   PR 8’s continue to sit in the mid 60s with bonds trading around $65F after trading in the high 60s just last month.

30 Day visible supply: 19.5bln