Wednesday, February 3, 2016

Corporate Bond Market
Investors seem cautiously optimistic today that markets will open stateside with a stronger tone (DJIA Fut +30, S&P Fut +4.5).  Oil halted declines and is hovering just over $30 a barrel.  Global equities were mixed overnight.  The Treasury market is selling off to start, with the yield on the 10yr now 1.876%.  Credit is unchanged to slightly better. 

I am expecting 2-3 new issues to price if the firm tone holds up: hearing of two financials and one industrial.  In market moving news, S&P downgraded a number of Energy/Oil names one notch yesterday: Chevron, Apache, Continental Resources, Devon Energy, EOG Resources, Hess, Hunt Oil, Marathon Oil, Murphy Oil, and Southwestern Energy.  The news was not unexpected and in fact a few of these credits rallied a bit after the news.  Strong earnings out of GM on the tape, beating estimates with high demand for SUVs

In economic news, MBA Mortgage Applications (7:00am), ADP Employment Change (8:15am), Markit US Services PMI (9:45am), Markit US Composite PMI (9:45am), and the ISM Non-Manuf. Composite (10:00am) are due to be released today.



Municipal Bond Market
Munis are weaker this morning after rallying throughout the curve on Tuesday.  Interdealer trading picked up during yesterday’s session with stronger bids across all sectors.  However, we continue to see extremely light demand coming from customers.  New issuance remains the focus, as the majority of market participants are looking to put capital to work in new deals versus the secondary.  The highlight of today’s calendar will be the pricing of a deal from the Chicago Board of Education.  The deal was delayed last week due to resistance from investors to buy BOE debt post being downgraded. 30-day supply is unchanged this morning with $10bn on tap over the next 30 days versus $10bn Tuesday.

PR trading remains light as the market continues to digest the commonwealth’s debt restructuring offering.  Benchmark 8s traded @ $70.625 (11.91%) on Tuesday, after trading around $71 last week.   

30-Day visible supply: $10bn



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