Thursday, February 11, 2016

Corporate Bond Market
Another down day for markets with global equities sharply lower overnight (DJIA Fut -270, S&P Fut -32, Euro Stoxx -3.29%).  The move down is led once again by a sell-off in European bank stocks and the failure of Janet Yellen’s comments to reassure investors that the central banks can support the economy.  Treasuries are rallying with the 10yr now at a 1.58%, off this morning’s low of 1.56% as New York walks in.  Oil continues its downward slide trading last at $26.47.   In credit the Investment Grade Index is out +4.5, at 125.5/126.5, which is in from the wides of +6.   Cash spreads are wider but difficult to say by how much just yet.

There continues to be no new issuance in the corporate market with the exception of a small REIT $25 par pfd deal from Senior Housing Properties.  We expect this to continue until we see some broader stability in the markets.  In corporate news, Cisco announced it was adding $15bn to its buyback program and increased their dividend.  SocGen is also in the news with a drop in quarterly earnings that is adding to the weakness in the sector.  We are seeing better sellers of SocGen bonds to start. 

In economic news, Initial Jobless Claims (8:30am), Continuing Claims (8:30am), and Bloomberg Consumer Comfort (9:45am) are due to be released today.  



Municipal Bond Market
Munis are significantly stronger this morning after an extremely quiet trading day on Wednesday.  The market has been hesitant to put money to work for weeks now; however, we are getting to the point where they will be forced to start buying.  The market continues to focus on the primary, with dealers looking to build line items solely off of new deals.  30-day supply is weaker this morning with $9.07bn on tap over the next 30 days versus $12bn Tuesday.

In credit news, the senate passed the PREPA restructuring plan 16 to 10.  PREPA paper is unchanged in early trading; however, we should see price movement throughout the day.   The market continues to view this deal negatively for GOs.  Benchmarks 8s were bid $68 in early trading.   

30-Day visible supply: $9.07bn


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