Wednesday, May 25, 2016

Corporate Bond Market

US Equity Futures are strong for the second straight day with the DJ Futures +73 and the S&P Futures +9.25 to start the session. The global trend is positive; all overseas equities are up for the most part. European markets are up and Asian markets are mixed. Oil is up to $49.09 and rates are weaker with the 10yr Treasury last quoted at 1.863%. Credit is firm with the Invest Grade Index stronger at 77.6/78.2 and cash is also up.

In credit news, there will be a fair amount of deals coming to market today. Yesterday saw $6.05bn priced in IG Credit and $2.35bn in HY Credit. Of the new issues, we are active in: Buenos Aires, HSBC, and Spirit. There are 4 deals already set to price today with more to come. Some notable mentions are: British Columbia, Calatlantic, Qatar, and Wells Fargo.

In the news, Microsoft said that it will cut as many as 1,850 jobs to cut costs and get back on track. In other news, despite Hewlett Packard’s ability to outperform Wall Street’s expectations in its latest earnings report, the company is having a hard time finding a buyer.

In economic data, there are a couple announcements scheduled for today. US Mortgage Applications have risen to 2.3% over the past week (up from -1.6%). Later on, FHFA will be reporting the US House Price Purchase Index and the Markit US Services PMI Business Activity will be released as well.

Municipal Bond Market   

Munis are weaker again this morning after facing cuts across the curve for the 5th straight day. We continue to see extremely light demand in the primary and secondary as dealer inventories continue to build.  Offerings on The Muni Center hit a two month high with 67,000 in offerings vs. a 30 day average. Micro deals under $100mln have faced pressure during pricing periods and we continue to see balances across a variety of different names.  Today is the order period for Chicago Midway Airport which will be give a good indication of how receptive the market is to larger deals.  30 day supply is weaker this morning with $22.9bln on tap over the next 30 days versus $15bln Tuesday.

PR trading remains light heading into July payments.  PREPA paper continues to rally with odd lots trading in the high $50’s compared to trading the low $50s for the past two weeks.    PR 8’s continue to strengthen as well with bonds trading around $66.50 off of lows of $63.00.

30 Day visible supply: $15bln