Wednesday, February 10, 2016

Corporate Bond Market
The market tone is decidedly more positive this morning as European Bank stocks rebound and lead equities higher.   The rally was sparked by Deutsche Bank’s announcement that the bank is ‘rock solid’ and that they would consider a bond buyback.   Shares in Germany’s biggest bank rallied 17% on the headlines (Euro Stoxx up +2.64%, DJIA Fut +129, S&P Fut +19.75).  The treasury market is selling off a bit with the yield on the 10yr last at 1.767%.   The Investment Grade Index is tighter for the first time in a few sessions at 115/116 (-4).   Cash spreads are tighter, though it feels as though investors are more likely to sell into the strength than put more risk on.  The beleaguered commodities market showing some signs of life as well this morning as oil trades off the lows at $28.65 last.

There remain a number of new issues on the sidelines awaiting some market stability to print.  Estimates for the month are at $80-90bn, of which we have only seen $5bn come so far.  There is a 10yr Treasury auction today, and a 30yr Treasury auction tomorrow.   

In economic news, MBA Mortgage Applications (7:00am) and the Monthly Budget Statement (2:00pm) are due to be released today.  



Municipal Bond Market
Munis are weaker this morning after an uneventful trading day on Tuesday.  The market seemed hesitant to put money to work in the secondary as we head into the order period for a few of the weeks largest deals.  Notable deals today are $130mln from the University of IL, $68mln College Station GOs, and $35mln Oldham County KY.  30-day supply is weaker this morning with $9.07bn on tap over the next 30 days versus $12bn Tuesday.

PR trading remains light as the market continues to prepare for debt restructuring scenarios.  In PREPA news, the PR senate will vote on the PREPA restructuring plan today.   This is just the beginning of a long process and we should see light PREPA trading heading into the vote. Benchmark 8s traded @ $70.00 (12.03%) on Monday, after trading around the same $71 on Friday.   

30-Day visible supply: $9.07bn


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