Tuesday, May 24, 2016

Corporate Bond Market

US Equity Futures are up to start the day with the DJ Futures +63 and the S&P Futures +8 in early trading. The global tone is positive; all overseas equities are up for the most part. European markets are up and Asian markets are mixed. Oil is up to $48.16 and rates are weaker with the 10yr Treasury last quoted at 1.849%. Credit is firm with the Invest Grade Index is a bit stronger at 81.8/82.3 and cash is also stronger.

In credit news, today will be a heavy day in new issuance with futures up in the shortened week. Yesterday’s primary market saw $10.6bn priced in IG Credit $1.225bn in HY Credit. Of the new issues, we are active in: Dominion, N STAR, Quest Diagnostics, and USAA. There are 4 deals already set to price today with more to come. Some notable mentions are HSBC issuing a NC5 hybrid and Three Gorges Finance issuing 5 & 10yr bonds.

In the news, Apple announced that its future efforts will be geared toward health monitoring technology. At a conference in Amsterdam, CEO Tim Cook suggested that we need to keep better track of our health and that in future Smartwatch software updates there will be alerts focused on preventing sickness and disease. In other news, AutoZone missed analysts estimates while Best Buy outperformed Wall Street’s expectations. Hewlett Packard and Fairway Group Holdings will be reporting earnings later today.

On the economic forefront, there are two announcements scheduled for today. Monthly change in New Home Sales will be reported at 10AM and the Richmond Fed will be releasing their Manufacturing Survey.

Municipal Bond Market   

Munis are unchanged this morning for the second straight day. We saw extremely light secondary volume to start the week as the market begins to assess the $7.7bln in new issuance scheduled.  In addition, last week’s severe move caught a lot of traders offside’s leading to dealers unwilling to take losses on aged positions.  The market will be focused on a variety of micro deals today before we head into some of the larger deals such as Chicago Midway Airport later in the week. 30 day supply is stronger this morning with $15bln on tap over the next 30 days versus $13bln Monday.

PR trading was light to start to the week.  We continue to see PREPA, GO, and COFINA debt stabilizing a few points higher than where they have traded over the past few weeks.   The market is still awaiting more color out of the commonwealth as we approach July 1st payments which will continue to restrict any upside.

30 Day visible supply: $15bln