Monday, September 12, 2016

Corporate Bond Market

US Equity Futures are down to start the week with the DJ Futures -103 and the S&P Futures -11.25. The global trend is negative with overseas equities trading lower through the overnight. Oil is down to $45.03/ barrel and rates are also weaker with the 10yr Treasury last at to 1.682%. Credit is wider with the Invest Grade Index showing 76.005/76.542 and cash is also weaker.

In credit news, last week’s primary market saw $59.91bn priced in Investment Grade Credit and $9.51bn priced in HY Credit. New issuance consensus for September 2016 is $126b in Investment Grade.

In economic data, there are no major reports scheduled for today.

Municipal Bond Market

Munis are weaker this morning for the 4th straight day as the market continues to see pricing pressure ahead of one the largest new issuance weeks of the year.  The primary will hit $15bln this week highlighted by two NY deals larger than $1bln each.  We expect to see some selling in the high grade space ahead of such a large calendar as accounts look to sell the front end and put money to work in longer dated maturities.  There is still a significant amount of cash on the sidelines so the combination of a pull-back in rates and one of the largest calendars of the year could present a significant buying opportunity for end accounts.  Supply is stronger this morning with $18bln on tap over the next 30 days versus $13bln on Friday. 

PR paper continues to rally with COFINA subs and GO paper receiving the most attention.  COFINA subs with 6 coupons have seen the biggest move with bonds rallying from the low $50s to a bid side closer to $55.Insured paper continues to see the greatest demand with aggressive buying across the curve from both dealers and customers. 

30 Day visible supply: 18bln