Monday, May 16, 2016

Corporate Bond Market

US Equity Futures are relatively flat to start the week with the DJ Futures -4 and the S&P Futures +.25 in early trading. The global tone is negative for the most part. European equities are down through the overnight while Asian markets are mixed. Oil is up to $47.24 and rates are weaker with the 10yr Treasury last quoted at 1.729%. Credit is feels firm though the Invest Grade Index is a bit stronger at 82.4/82.89 and cash is unchanged.

In credit news, the five-day forecast is expected to be another monster week in new issues. Apple, Dell, Ford, GE, Kallpa Generacion, Merck, Priceline, Quest Diagnostics, Reynolds American, and Statoil are all expected to price this week. Last week’s primary market saw $56.035bn priced in IG Credit and $6.875bn in HY Credit.

In the news, Warren Buffet disclosed Berkshire Hathaway’s $1bn stake in Apple. Pfizer has agreed to purchase Anacor Pharma for $55.2bn to gain control of their eczema skin treatment; paying a 55% premium for the shares @ $99.25 apiece. Lastly, ICAP will be changing its identity to NEX Group once it finalizes the sale of its voice-broking business to Tullett Prebon, changing itself into an electronic markets and post-trade services specialist. 

On the economic forefront, there are a few announcements scheduled for today. First, the NY FED have released that the Empire State Manufacturing Survey fell to 9.02 vs. 9.56 in April. Up next, the NAHB will be reporting the Homebuilders Sentiment. Later in the afternoon, the US will be reporting the monthly total of US Treasury International Capital Inflows and US Foreign Net Transactions. 

Municipal Bond Market   

Munis are unchanged this morning after rallying for most of last week. The primary dominated the market with most deals coming in 5x-10x oversubscribed. The hottest deal of the week ended up being Chicago Waters which traded up about 40bps from original price talk. New issuance will hit about $11bln this week which is significantly higher than the $8bn average we have seen for most of 2016. The most anticipated deal of the week will come from the LaGuardia Terminal B redevelopment project. The deal is Baa3 and is the largest deal of 2016 with $2.5bn in debt being issued. Muni funds continue to face inflows with $1.2bln in new cash; this marks the 32nd straight week of inflows. 30 day supply is significantly higher this morning with $17bln on tap over the next 30 days versus $12bn Friday.

PR paper continues to drift with very little demand for non insured paper at the moment. Benchmark GOs continue to trade in the low $60s with bonds trading @ $63.875 on Friday after trading around that lvl for most of last week.

30 Day visible supply: $17.2bln