Monday, May 23, 2016

Corporate Bond Market

US Equity Futures are down to start the week with the DJ Futures -9 and the S&P Futures -1 this morning. Overseas equities are mixed through the overnight with European markets down and Asian markets mixed. Oil is down to $47.76 this morning and rates are stronger with the 10yr Treasury last at 1.831%. Credit is wider with the Invest Grade Index slightly lower at 83.87/84.53 this morning while cash is also bit weaker.

In credit news, dealers are expecting more than $20bn in IG issuance this week with five deals already set to price today with a possibility of more to come. We could be seeing deals from: The Russian Federation, Axis Bank, Albertsons, ANZ, ICBC, and Pennymac. Last week’s totals hit $66.1bn in IG issuance and $6.65bn priced in HY new issuance.

In economic data, the US will be announcing the Manufacturing Purchasing Managers’ Index later this morning.  

Municipal Bond Market    

Munis are unchanged this morning as the market continues to face pressure 15 years and in. We have seen an extremely aggressive sell off in higher quality names in that range.  HY paper also came under pressure with the pricing of $2.5bln Baa3 bonds for the LaGuardia Airport Terminal B Project. The deal consumed the market for most of last week and took the majority of buyers out of the market as they waited on allocations.  New issuance will drop $7bln this week from about $9bln last, however, supply continues to remain around the average for the year.  We should see issuers on smaller deals make some price concessions here with such weak demand for bonds at these levels. 30 day supply is unchanged this morning with $13.8bln on tap over the next 30 days versus $13bln Friday. 

In credit news, PREPA bonds rallied after bond holders agreed to pay $55mln in bond proceeds to the utility.   PREPA paper traded up to the mid $50s for odd lots and closer to $60 for larger pieces.  We should see bonds sit around this level until we get more color out of the commonwealth.   Benchmark GOs have started to stabilize around @ $66 after trading around $63 for most of the past two weeks.

30 Day visible supply: $13.8bln