Thursday, February 18, 2016

Corporate Bond Market
The market feels unchanged to slightly better this morning.  Stock futures are up with the DJIA Fut +42, and S&P Fut +4 and global equities are all posting modest gains as New York walks in.   Oil continues to gain as Iran backs the output freeze, trading last at $31.35.   The Treasury market is unchanged for the most part with the 10yr yield still hovering around a 1.82%.  Credit is also unchanged to slightly better: the Investment Grade Index is -.5 at 115.5/116.50 and cash spreads are unchanged to maybe 1-2bps better.  The high yield market, including the AT1/CoCo sub financials is probably +.5.

Yesterday marked another successful day for new corporate issues.  The outperformer was the two-tranche Electronic Arts deal.  They priced a 5yr and a 10yr that traded 5-10bps better almost immediately with mostly buyers.  Kimberly Clark also came to market with 3yrs and 10yrs that traded mostly around issue.  We would expect another 2-3 benchmark transactions to try to print today.  WTD we are at $24bn, MTD at $29bn. 

In market moving news, Devon Energy announced a 55mm stock offering.  The bonds traded 20bps better while the stock was off roughly 10%. 

In economic news, Initial Jobless Claims (8:30am), Continuing Claims(8:30am), and Leading Index (10:00am) are due to be released today.



Municipal Bond Market
Munis are firmer this morning after selling off across the curve for the third straight day.  We continue to see very little buying from institutional accounts unless they are required to put money to work here.  New issuance continues to face its challenges as older deals sit with balances and dealers struggle to move line items.  Highlights of today’s calendar include $550mln from Kentucky Building Authority, $330mln NC ST GOs, and $401mln University of North Carolina bonds.  30-day supply is weaker this morning with $8.7bn on tap over the next 30 days versus $8.8bn Wednesday.

In the PR space, we saw aggressive buying of PREPA paper after the senate agreed to amendments made to the PREPA restructuring bill.  The most notable trade of the day was 2.9mm 5.25% of 2040 @ $67 after trading in the low $60s earlier in the week.   We expect to see PREPA drift higher here, however, there is still a long way to go in the restructuring process which should cap gains. 

30 Day visible supply: $8.7bn