Thursday, June 16, 2016

Corporate Bond Market

US Equity Futures are down to start the day with the DJ Futures +75 and the S&P Futures +9. The global tone is negative across the board with all overseas equity markets up through the overnight. Oil is down to $47.07/ barrel and rates are rallying with the 10yr Treasury last quoted at 1.548%. Credit is wider with the Invest Grade Index showing at 86.5/87 and cash is also weaker.

In credit news, yesterday accounted for the lowest volume traded since December. In anticipation of next week’s BREXIT vote and bank stress tests, risk is off in the marketplace and it will be a very light day in new issue. Yesterday’s Investment Grade primary market saw $1.795bln priced and $300mln in High Yield; MTD numbers tally $59.775bln in IG and $19.925bln in HY.

In economic news, the US reported initial and continuing jobless claims that exceeded expectations. Also, Consumer Prices excluding food rose .2% and core prices have gone up 2.2% this year.

Municipal Bond Market   

Munis are stronger this morning after staging a late day rally on Wednesday.  Buyers returned to the market after the fed commentary with aggressive buying.  Supply is going to be light over the next few weeks which should continue to force muni yields lower as funds continue to face inflows of cash.    The highlight of today’s calendar will be the order period for $500mln IL ST GOs.  The deal should receive significant demand from HY funds and is expected to come around the same spreads as BB rated deals over the past two weeks.  This is the first time the state has come to market since January and is expected to be penalized due to current budget issues. 30 day supply is stronger this morning with $8.3bln on tap over the next 30 days versus $7bln yesterday.

PR trading was light on Wednesday after two very active trading days.   .  PREPA bonds continue to trade higher after the Supreme Court ruling.  The market has viewed the ruling positive for most PR credits which have lead to price increased across all debt sectors.  Benchmark GOs continue to see very little price movement; bonds traded around $66 on Wednesday.

30 Day visible supply: $7.2bln