Monday, June 6, 2016

Corporate Bond Market

US Equity Futures are strong to start the week with the DJ Futures +61 and the S&P Futures +5.75. Overseas equities are mixed through the overnight with European equities up and Asian markets mixed. Oil is up to $49.72 and rates are down with the 10yr Treasury last quoted at 1.72%. Credit feels firm with the Invest Grade Index showing at 75.6/76.2 and cash is also stronger this morning.

In credit news, May’s primary market totaled $209.51bln in Investment Grade and $28.42bln in High Yield. The first three days of June showed a decent tally in new issuance with $19.88bln priced. This week is expected to have anywhere between $15-$30bln brought to market depending on the Feds comments regarding Friday’s huge miss on May’s job report and what the future holds for a possible June rate move.

In economic data, the Fed will be releasing the Average Monthly Change in Fed Labor Market Conditions this morning. It is expected that after a displeasing jobs report on Friday; the announcement will be negative for the 5th straight month. The fact that 2016’s Labor Market Conditions have been missed each month will give the Fed something to think about when deciding if the US economy can sustain an anticipated rate hike this month.

Municipal Bond Market

Munis are unchanged after rallying across the curve on Friday.  The market had faced serious pressure over the past few weeks, selling off for seven consecutive trading sessions.  This week should be a good indicator on how much muni demand is out there right now with almost $15bln in new debt scheduled to be priced. This will be the largest new issue calendar of the year so it will be interesting to see how the market is able to digest this much new debt. Funds continue to face inflows with $450mln in new cash versus $900mln during the previous week. 30 day supply is stronger this morning with $16bln on tap over the next 30 days versus $11bln Wednesday.

PR trading remains light as approach July 1st debt payments. We should see increased demand for insured paper here if munis continue to Fridays rally.  PR benchmark GOs continue to trade in the mid $60s with bonds trading @ $64.50 on Firday.

30 Day visible supply: $16bln