Thursday, May 5, 2016

Corporate Bond Market

US Equity Futures are up for the first time in 5 days with the DJ Futures +47 and the S&P Futures +6 to start the day. The negative global trend is starting to make progress with all European equities showing strength and Asian markets mixed. Oil is up to $45.73 and rates are down with the 10yr Treasury last at 1.79%. Credit is wider with the Invest Grade Index at 83.524/84.336 this morning while cash is also slightly weaker.

In credit news, $6.95bn IG and $750mn HY Credit priced yesterday. Yesterday had a decent amount of new issues despite the overall negative drift and volatility. Of those issued, we are active in AT&T, GM, BCR, and US Steel. Though issuance is expected to be light today, Shell and Barclays have already announced their respective benchmark deals that will be coming to market.

In the news: Fed’s Senior Loan Officer Survey emphasized tightness in bank lending standards to corporates, signaling that we are in the contraction period of the credit cycle. Allstate, CenturyLink, Laredo, Marathon Oil, Sunoco, and Tesla beat analysts’ estimates for Q1. GoDaddy, Leucadia, MetLife, Williams Partners, and WPX are among those that missed projections. Keep a look out for: Chesapeake, SunEdison, Linn Energy, GoPro, Yelp, Acadia, Wynn, Kellogg, MGM, and NRG announcing earnings today.

In economic data the Department of Labor will be releasing the US Initial and Continuing Jobless Claims this morning. ADP’s announced that US companies added less employees in April than expected. The estimate was that 194,000 new jobs would be filled while the numbers showed only 156,000 employees were added. This resulted in the smallest monthly gain since April 2013. Following, the Fed’s Bullard will be speaking at the Santa Barbara Conference.

Municipal Bond Market   

Munis are unchanged this morning after a quiet trading day on Wednesday.  Secondary volume was nonexistent as the market focused on the largest day of new issuance for the week.  We saw order periods for a variety of deals including NJ City University, the Walt Disney Museum and the largest deal of the week from the North Texas Toll Authority.  Almost every deal saw extremely strong demand and was bumped throughout the curve. NJ City University 4’s of 2035 were bumped from a 2.33% to a 2.24%. 30 day supply is weaker this morning with $11.2 on tap over the next 30 days versus $13bn Wednesday.

In credit news, PR has declared a moratorium on PRIFA debt.  These bonds are backed by a GDB letter of credit which lead the commonwealth to act so quickly after missing the GDB payment.  PRIFA paper has traded at distressed levels for months now and a moratorium will have little impact.  Benchmark GOs continue traded slightly lower as demand continues to fade.  Bonds traded @ $64.25 trading around $65 earlier in the week.

30 Day visible supply: $11.2bn