Thursday, June 9, 2016

Corporate Bond Market

US Equity Futures are weak to start the day with the DJ Futures -55 and the S&P Futures -7.75. European equities are also down and Asian markets are mixed through the overnight. Oil is down to $50.65/ barrel and rates are stronger with the 10yr Treasury last quoted at 1.671%. Credit is wider with the Invest Grade Index showing at 74/74.5 and cash is also weaker this morning.

In credit news, yesterday was a decent day in new issuance. The Investment Grade primary market saw $10.85bln priced and $6.75bln in the High Yield space. Of the new issues, we are active in: Bank of Montreal, South Carolina Electric & Gas, Wells Fargo, and Under Armour. Today is expected to be another $10bln+ day in new issues. Asian Development Bank, Ontario, and Bank of Montreal will be leading the way in IG and Dell is set to issue a 2-part deal in the HY space.

In economic news, there are a couple of key economic reports that are scheduled for today. First, the Department of Labor will be reporting the US Initial and Continuing Jobless Claims.  Following, the FOF Federal Reserve will be speaking on US Households & NPO Net Worth Change for Q1 2016.

Municipal Bond Market   

Munis continue to rally with market showing signs of strength across the curve.  New issuance was met with extremely strong demand for the 4th straight day as longer maturities continue to come in 5x-10x oversubscribed.  The market is definitely starved for yield at the moment as we continue to see strong demand for any debt offering a little extra yield.  Demand for the primary will remain strong today with a variety of smaller deals coming to market.  30 day supply is weaker this morning with $8.6bln on tap over the next 30 days versus $12bln Wednesday.

In PR news, the house is set to vote on the Puerto Rico Bill today.  The market will be watching closely and this point the bill is expected to pass. Demand has been extremely light across all non-insured PR sectors and we should see that continue today.  PR benchmark GOs continue to trade in the mid $60s with bonds trading @ 65.50 on Wednesday.

30 Day visible supply: $8bln