Monday, May 9, 2016

Corporate Bond Market

US Equity Futures are strong to start the session week with the DJ Futures +31 and the S&P Futures +3.50 this morning. The global tone is positive; all overseas equities up through the overnight with European and Asian markets all in the green. Oil is up to $44.75 and rates are also up with the 10yr Treasury last at 1.77%. Credit is firm with the Invest Grade Index at 83.55/84.30 and cash is unchanged.

In credit news, expect a heavy week in new issuance. This week is anticipated to have $45-50bn priced in IG credit coming after a sluggish week. Four deals are already set to price today with a possibility of more to come: AAPL, DB, Mubadala, and Westpac. In HY, there were only 6 deals priced as spreads widened and yields rose. Last week tallied the largest outflow in HY from retail funds since January.

In the news: Horizon, Oasis Petroleum, Stifel, and Wayfair will be releasing earnings today. Also, Krispy Kreme will be acquired by JAB Bech for $21/share in cash.

In economic data the Fed will be releasing the average monthly change in Fed Labor Market Conditions, Q1 Mortgage Delinquencies and Foreclosures.

Municipal Bond Market   

Munis are starting off the week with a firmer tone as we continue to see strong demand across the curve.  The market easily absorbed last week’s new issue calendar as funds continue to face inflows and put money to work that has been on the sidelines for months.  Attention will be on the primary yet again with a new issue calendar of about $8bln.  Yieldier names will dominate the calendar with new debt coming from the Alameda Corridor Transportation Authority (BBB), Central Texas Regional Mobility Authority (BBB-) and Chicago Water Authority (AA).  Muni funds recorded their 31st straight week of inflows with $709mln in new cash. 30 day supply is stronger this morning with $13.6bln on tap over the next 30 days versus $12bln Friday.

PR trading remains light across all debt sectors as approach July payments.  We continue to see demand in spots for insured paper with such little yield in the market right now.  PR benchmark 8s continue to drift into the lows $60s, bonds traded @ $63.375 after trading around $65 last week.

30 Day visible supply: $13.6bln