Monday, February 1, 2016

Corporate Bond Market
Global equities are trading off to start the week, down on weak Chinese manufacturing numbers.  US equity futures also in the red with the DJIA Fut -111 and S&P Fut -14.50.  The Chinese data renewed the pressure on commodity markets after a brief respite last week.  Oil is trading down at $32.38 which is off about 3.5%.  The yield on the 10yr treasury is now back below 2% at 1.92% last.  Credit is opening up unchanged to slightly wider.   The Investment Grade Index is +2.25 at 103.75/104.75 last. 

The primary market has been relatively quiet with the exception of a large deal from AT&T on Friday.  While the deal initially traded tighter, the equity weakness seems to be weighing on it this morning with decidedly more sellers than buyers.  Estimates for this week are $20-25bn with potential for 1-2 benchmark deals today.  

In economic news, Personal Income and Outlays (8:30am), Gallup US Consumer Spending Measure (8:30) PMI Manufacturing Index (9:45am), ISM Manufacturing Index and Construction spending (10:00am) are due to be released today.



Municipal Bond Market
Munis are unchanged this morning as the market continues to lack direction.  New issue this week will hit $5.37bn versus $4.26bn during the prior week.  Highlights of this week’s calendar will include $1.2bn from the Florida State BOE, $247mln from the Atlanta Transit Authority, and $215mln San Antonio GOs.  Munis continue to receive new cash as $594mln flowed into funds, which brings us to 17 straight weeks of inflows.  Large amounts of cash remain on the sidelines as customers are hesitant to put money to work here.  We expect last week’s trend to continue, with customers only putting cash to work as needed and looking to do so in the primary.  30-day supply is stronger this morning with $9.5bn on tap over the next 30 days versus $8bn on Friday.

PR trading remained light as we headed into Fridays meeting between the commonwealth and creditors.   The island presented a potential restructuring plan which will be released to the public later today.   Benchmark 8s traded @ $71.50 (11.93%) on Friday, we have not seen any trades in PR paper this morning.   

30-Day visible supply: $9.5bn



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