Thursday, May 12, 2016

Corporate Bond Market

US Equity Futures are up to start the day with the DJ Futures +87 and the S&P Futures +13 in early trading. 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 $46.75 and rates are weaker with the 10yr Treasury last quoted at 1.756%. Credit is firm though the Invest Grade Index is a bit stronger at 80.77/81.35 and cash is also stronger.

In credit news, today will be another big day in new issuance. Yesterday’s primary market saw $10.8bn priced in IG Credit $1.4bn in HY Credit. Of the new issues, we are active in: BWP, CBAAU, ED, and JPM. The weekly total has brought $46.375bn in IG which is showing that we may exceed the projected $50bn estimated for the week. EBRD, ANZ, and ICBC are all set to price today in IG Credit with a possibility of more to come. In the HY space, Performance Food Group will be issuing sr notes later today.

In the news, today will be a day filled with retail earnings. Kohl’s and Macys missed analysts estimates while Ralph Lauren and Nordstrom will all be reporting today. The retail outlook does not look positive moving into the future as Amazon has single handedly taken over the business with more attractive pricing and convenience. It will be tough for the industry to rebound without being able to mark up their inventory being in competition with Amazon.  

On the economic forefront, there are a few announcements scheduled for today. First, the US Import Price Index by End Use will be released at 8:30AM. Following, the Department of Labor will be reporting the US Initial and Continuing Jobless Claims. Finally, the MBA will be releasing Mortgage Delinquencies and Foreclosures.

Municipal Bond Market   

Munis are unchanged this morning after rallying across the curve on Wednesday.  We saw aggressive demand on the long end in both the primary and secondary. Order periods for Chicago Waters and Alameda County Transportation Authority started Wednesday and were over 10x oversubscribed as we expected. On the long end, Chicago Water 5’s of 31 were bumped 17bps from initial price talks. Today should be quiet in the secondary with the majority of accounts awaiting allocations on some of the larger deals from earlier in the week. 30 day supply is unchanged this morning with $12bln on tap over the next 30 days versus $12bln Wednesday.

We continue to see a substantial amount of insured PR paper out for the bid.  The market continues to digest the supply easily due to the lack of yield in the market right now.  On the non insured front, benchmark GOs continue to trade in the low $60s with bonds trading @ $63.25 on Tuesday.

30 Day visible supply: $12bln