Tuesday, March 1, 2016

Corporate Bond Market
Firm tone to global markets this morning as oil continues to trend upwards: WTI last at $34.35, Euro Stoxx is +1.06%, Nikkei +.37%, and Hang Seng is +1.55% bolstered by continued Asian central bank stimulus.  Stateside, the story is the same with DJIA Futures +121, and S&P Futures +15.   Treasuries are selling off and the yield on the 10yr is now at 1.75%.  Credit feels firm to start, with cash spreads opening a touch tighter.  The Investment Grade Index is -1.5 at 105.5/106.5.  Yesterday was a very active day in the primary market with a $12bn, multi-tranche deal from Exxon Mobile leading the way.  The deal priced with a significant concession and, as a AAA credit, it was well received in both the US and abroad.  All tranches are trading 10bps+ tighter.  There was also a deal from Hyatt and Suntrust, a sub-bank deal from Bank of America, as well as a $25 par pfd from Schwab that priced at a 5.95% and is already trading at a premium.  Estimates for March are calling for $100-110bn in new deals, with rumors of at least 4 names on tap for today.  The only one that has been announced so far is a 10yr deal from Citigroup.

In market moving news, Barclays is on the tape with restructuring plans that include a tender for their outstanding 6.86% sub debt roughly six points above where they were trading.  This should boost the entire AT1, T1 yankee market. 

In economic news, Markit US Manufacturing PMI (9:45am), ISM Manufacturing (10:00am), ISM Prices Paid (10:00am), and Construction Spending MoM (10:00am) are due to be released today.

Municipal Bond Market
Munis are unchanged this morning after an extremely quiet start to the week.  We saw light demand in the secondary as the market begins to digest the largest new issue calendar in about a year with $10bn scheduled.  The largest week of the deal is set to price today, with city of Los Angeles bringing a $1.2bn deal.  Buyers should see this as an opportunity to put some cash to work with supply leading to sloppy trades in the secondary.  30 day supply is stronger again this morning with $13bln scheduled over the next 30 days versus $12bn Monday.

PR trading remains light with very few trades across all series of debt.  We continue to see little demand for both insured and non insured paper.  For the first time in months, BWs have been scarce with very few sellers or buyers of the name at these levels.   PR 8’s of 2035 traded as high as $72.25 last week after trading below $70 two weeks ago.  There was not a single institutional trade in the benchmark debt yesterday. 

30-Day visible supply: $13bn



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