Monday, March 21, 2016

Corporate Bond Market
US Equity futures are up to start the session with the DJ Futures +19 and S&P Futures +2 in early trading.  Overseas equities were mixed overnight with Asian stocks up and European equities mixed.  Oil is holding steady at $39 this morning.  Treasuries are giving up some of their gains with the 10yr last at a 1.88%.  In general there seems to be a firm tone with investors more comfortable with risk as central banks renew their commitment to support the markets.  Credit is unchanged to slightly better with the Investment Grade Index at 81/82. 

Last week was another monster week for new issue.   The primary market saw $44bn in new supply which marked the fifth straight week of $40bn+.  The deals were well received and traded tighter almost immediately.  Friday saw an $8bn, six-tranche deal from Newell Rubbermaid that came at a nice concession.  Bonds traded 15-20bps tighter almost immediately and we are seeing continued investor demand for paper this morning.  We would expect any deals this week to be front end loaded into Monday and Tuesday ahead of the Easter holiday.  The only deal announced so far is a benchmark FedEx 10yr and 30yr.

In credit news,  Starwood has accepted an improved offer from Marriott that values the company at $13.6bn.    Sherwin-Williams is also on the tape with news they intend to acquire Valspar in a $9.3bn transaction.    On the economic data front, Existing Home Sales numbers due out later today.


Municipal Bond Market
Munis traded stronger on Friday as the market continues to look to Treasuries for direction. New issuance remains the focus of the market with both dealers and customers sourcing bonds from new deals.  We saw extremely strong demand for new debt last week with demand for selects maturities coming in 10x oversubscribed.  Demand carried over to the secondary with the taxable portion of Vanderbilt med centers trading up much as 30bps.  Highlights of this week’s calendar include $582mln from the city of Houston, $497mln from Energy Northwest, and $353mln from Denver County.  30-day supply is stronger this morning with $9bn scheduled over the next 30 days versus $7bn Friday.

PR trading remains light with very few trades across all series of debt.  The next hurdle for the commonwealth with be a rate increase from the electric power authority.  The restructuring agreement for PREPA debt is conditional on the increase.  Benchmark GO 8s of 2035 traded Friday @ 72.25 (11.63%), after trading around $71 earlier in the week.

30-Day visible supply: $9.2bn