Wednesday, June 15, 2016

Corporate Bond Market

US Equity Futures are strong to start the day with the DJ Futures +50 and the S&P Futures +4.75. The global tone is positive across the board with all overseas equity markets up through the overnight. Oil is down to $48/ barrel and rates are weaker with the 10yr Treasury last quoted at 1.625%. Credit feels firm with the Invest Grade Index showing at 82.5/83 and cash is also stronger.

In credit news, today will be another light day in new issuance. Yesterday’s Investment Grade primary market saw $2.05bln priced and $300mln in High Yield; MTD numbers tally $58bln in IG and $19.925bln in HY.

In economic news, the MBA reported that the weekly change in US Mortgage Applications has decreased 2.4% last week. Later this afternoon, the Fed will be announcing their decision on whether they will be increasing the fed funds rate. It is almost certain that they will hold off on a rate hike until further notice.

Municipal Bond Market   

Munis are unchanged this morning after one of the strongest trading days we have seen over the past week.  Tuesday started off with aggressive buying right out of the gate, however, demand faded late in the day.  We expect to see a light trading this morning heading into the fed this afternoon.    Any money being put to work today will be done in the secondary with the majority of the weeks deals already priced.  HY buyers should be focused on order period for $500mln IL ST GOs.  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 weaker this morning with $7.2bln on tap over the next 30 days versus $10bln yesterday.
 PREPA paper continued to react positively to Tuesday’s Supreme Court ruling.   .  PREPA bonds traded as high as $62.375 after trading in the high 50s over the past two weeks.  Benchmark GOs continue to see very little price movement; bonds traded around $66 on Wednesday.

30 Day visible supply: $7.2bln