Monday, June 27, 2016

Corporate Bond Market

US Equity Futures are down to start the week with the DJ Futures -150 and the S&P Futures -17.50. The global tone is negative across the board with all European and Asian markets down aside from Shanghai through the overnight. Oil is weaker at $47.09/ barrel and rates are stronger with the 10yr Treasury last quoted at 1.47%. Credit is wider with the Invest Grade Index showing 88/89 and cash is also weaker.

In credit news, last week was a very light week in new issuance. $2.7bn priced in IG and $1.35bn priced in the HY space. It looks like corps are still waiting for positive indicators to bring big deals to market.

In economic news, the world economy is still skittish following Brexit news. The Markit will be releasing the PMI for US Business Activity later this morning.

Municipal Bond Market   

Munis are significantly stronger this morning for the second straight day after Thursdays surprising brexit outcome.  The outcome caught the market extremely off guard sending larger accounts into a panic to put money to work.  On Friday was saw aggressive buying across the curve in the most active trading day of the year.  The overnight move in tsys on Thursday brought muni ratios to extremely attractive levels which brought in nontraditional muni accounts.  New issue is about $8bln this week and should see strong demand. 30 day supply is weaker this morning with $10bln on tap over the next 30 days.
PR trading was quiet on Friday as cross over buyers focused on the volatility in other asset classes.  Demand for insured paper remains strong and will continue to be in focus due to low yields across the rest of the market.   PREPA bonds continued to trade in the low $60s after the Supreme Court’s ruling last week and we expect them to move higher from here. 

30 Day visible supply: $10bln