Monday, February 22, 2016

Corporate Bond Market
This week is off to a very strong start for Global Markets.   Oil prices are up again and that seems to be fueling the rally on the back of Russia and Saudi Arabia capping production levels (WTI last at $30.78, Euro Stoxx +1.86%, Nikkei +.90%).   Stateside, Dow futures are up +178 and S&P Futures are up +20.  US Treasuries are selling off, with the yield on the 10yr last at 1.77%.   Credit has a much firmer tone with the investment grade index -2 at 116/117.   Cash spreads are also tighter.  The stability should lead to increased corporate issuance today.   Lipper is reporting Net Outflows of -1.122bn for Corporate Investment Grade Funds, while High Yield funds reported Net Inflows of +.066bn.

In market moving news,  Barrick Gold announced a tender offer of up to 750mm in outstanding debt.   That should mean tighter spreads in the name and in other names in the sector.   AT&T is in the headlines with a large investment in their Global businesses.   HSBC making headlines with a 4Q loss of $1.3bn.  In primary market news,  Goldman Sachs has announced a 5yr and 10yr transaction.  Express Scripts will be doing a 5yr, and 10yr deal today as well.  We are still expecting another 2-3 names to announce.  MTD we are at $38bn out of an expected $80-90bn with one week left to play.  

In economic news, Chicago Fed National Activity Index (8:30am), Markit US Manufacturing PMI (9:45am),are due to be released today.


Municipal Bond Market
Munis continued to face pressure across the curve on Friday with limited liquidity. The focus this week will be on the primary with the pricing of $6.8bn in new deals.  The primary has been the main source of bonds over the past few weeks with both dealers and customers selectively picking their spots.  This week will be crucial in determining how much demand is out there for muni debt as dealers struggle to move line items.  This could put some pressure on the pricing of new deals.  Cash continues to build on the sidelines with funds facing their 20th straight week of inflows with $680mln in new cash. 30 day supply is stronger this morning with $9.0bn on tap over the next 30 days versus $8.5bn Friday.

PR trading was light again on Friday as the market awaits more color out of the commonwealth.  At this point, it seems as if the majority of market participants are full on the name or not involved.  We should see light flow in PR paper until we receive more clarity approaching July payments.    PR benchmark 8’s traded @ $70.375 (11.95%) after dipping into the high $60’s last week. 

30-Day visible supply: $9.0bn



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