Tuesday, April 12, 2016

Corporate Bond Market
US Equity Futures are up to start the day with the DJ Futures +34 and S&P Futures +6 in early trading. Overseas equities were mixed overnight; Asian stocks showing promise and European stocks mixed. Rates are weaker with the 10yr last at 1.76%. Oil continues to rally up to $40.75. Credit continues to feel firm as the Investment Grade Index is unchanged at 81/82. Cash is slightly stronger as we begin the day. $7.45b IG credit priced yesterday; session pushed 2016 volume over the $500b mark.

Alcoa reported first-quarter profits that topped analysts’ expectations, but fell on revenues. Projected adjusted EPS reported $0.07/share, exceeding anticipations by $0.05/share. Alcoa cut forecasts for its largest manufacturing unit as the biggest U.S. aluminum producer prepares to split itself in two amid slumping profit, 1Q net income fell 92 percent to $16 million. On economic data front, Import Price Index numbers are out along with the Monthly Budget Statement.


Municipal Bond Market
Munis were mostly unchanged across the curve to start the week.  We saw extremely light demand in the secondary with very few items out for the bid and not many transactions.  The market seems to be holding off for some of the larger deals coming this week from the NYC TFA and the state of California.  The trend over the past few weeks was to sell the front end and reallocate cash to new issue.  At this point, that swap seems to be played out as the majority of new issuance has been tightened up on the long end.   30 day supply is stronger this morning with $12bln scheduled over the next 30 days versus $10bln Monday.

PR trading remains light with very few trades across all series of debt.   The commonwealth is expected to release updates to the debt moratorium this week which should have a substantial impact on PR trading into July payments.  The biggest loser over the past few weeks has been GO debt, so any kind of exclusion should be positive for the name.

30-Day visible supply: $12bn


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