Thursday, February 4, 2016

Corporate Bond Market
Stock futures initially traded higher this morning, but are now selling off as we approach the market open (DJIA Fut -26, S&P Fut -5.75).  Global equities are mixed with Euro Stoxx up +.35%,  the NIKKEI -.85% and the Hang Seng +1.01%.    The Bank of England left rates unchanged and dropped their call for a rate increase amid slower growth and inflation forecasts.  Oil is holding firm at recent higher levels, trading $32.10 last.  The Treasury market continues to rally with the 10yr at a 1.876%.   Cash spreads feel unchanged to slightly tighter this morning.  However, the Investment Grade Index is quoted +1.5 at 108.5/109.5.

In market movers, ConocoPhillips voted to cut its dividend which is good news for bond holders.  The often traded 10yr issues are roughly 15-20bps tighter on the headlines.  Credit Suisse posted their biggest quarterly loss since 2008.   Look for those bonds to trade wider, though not much action yet.  I am focused on the Genworth numbers this afternoon as they are due to report after market.   Yesterday in the primary market I saw a new 5yr deal from Regions Financial that priced at the wide end of the price talk and traded a few bps tighter. Home Depot also came to market with a three-tranche transaction.  It traded 2-5bps tighter in the secondary market.  WTD we are now at $4.7bn out of an estimated $20-25bn.  Seems unreasonable that we will hit that target.

In economic news,  Initial Jobless Claims (8:30am), Factory Orders (10:00am), and Durable Goods Orders (10:00am) are due to be released today.


Municipal Bond Market
Munis are weaker this morning after a mixed trading day on Wednesday.  We continue to see very little demand with buyers only putting money to work when absolutely necessary.  Demand continues to favor the primary over the secondary with BWs receiving very little attention.  30-day supply is stronger this morning with $11.1bn on tap over the next 30 days versus $10bn Wednesday.

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

30-Day visible supply: $11.1bn


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