Tuesday, February 2, 2016

Corporate Bond Market
Global markets are under pressure once again this morning as the sell-off in oil resumes in earnest – WTI Crude last at $30.75  and DJIA Fut -105, S&P Fut -13.50.  European and Asian equity markets all off 1-2%.   The Treasury market is rallying with the yield on the 10yr last at 1.928%.   Credit is wider to start with the Investment Grade Index +2 at 105.75/106.50.  Cash is +2-5bps depending on sector.  High Yield is off about .25pt so far. 

The primary market was quiet again yesterday with the exception of a 5yr deal from Starbucks.  They priced 500mm at +75 to treasuries.  The deal was well received and traded up 4-5bps almost immediately.  Bank of California also came to market with a $25 par at 7%.   Though the deal is not rated which took out a lot of institutional demand, there was still strong retail demand.   We are hearing possibly two benchmark financial transactions today.  Estimates for the week remain at $20-25bn. 

In the headlines,  ALLY Financial and ADT both reported this morning.  The numbers look in line with consensus and should not be significantly market moving in either direction.    Earnings out of BP and Exxon were severely impacted by the slump in oil prices and those names have traded wider putting additional pressure on the sector. 

In economic news,  ISM New York (9:45am) and IBD/TIPP Economic Optimism (10:00am are due to be released today.



Municipal Bond Market
Munis are slightly stronger this morning after an extremely quiet start to the week. Secondary trading was light as market participants gear up for this week’s $5.3bn in new issuance.  The highlight of today’s calendar will be the pricing of $210mln San Antonio Waters.  This deal should be met with extremely strong since February is large redemption month for Texas debt.  Munis seem to lack any kind of direction here and we expect to see buyers put money to work when absolutely necessary.  30-day supply is stronger this morning with $10bn on tap over the next 30 days versus $9.3bn on Monday.

PR GOs saw above average volume on Monday as market participants continue to digest the proposed restructuring plan form the commonwealth.  Benchmark 8s traded @ $70.625 (11.91%) on Monday, after trading around $71 last week.   

30-Day visible supply: $10bn



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