Tuesday, September 13, 2016

Corporate Bond Market

US Equity Futures are weak to start the session with the DJ Futures -117 and the S&P Futures -15.25. The global tone is mixed with overseas equities trading both up and down throughout European and Asian markets. Oil is down to $45.35/ barrel and rates are stronger with the 10yr Treasury last at to 1.659%. Credit is wider with the Invest Grade Index showing 73.98/74.46 and cash is also weaker.

In credit news, Monday’s primary market saw $1.2bn priced in Investment Grade Credit and $400mn priced in HY Credit. So far, today is expected to bring 5 AAA rated deals from Scotia Bank, CPPIB Capital, Kommunalbanken, Bank Nederlandse Gemeenten, and World Bank (IBRD). Keep a look out for BP Capital and Duke Energy also issuing new credit today.

In economic data, the NFIB Small Business Optimism for Aug resulted in 94.4% underwhelming the 94.8% estimate due uncertainty in the upcoming election putting pressure on Small US Firms. Later today, Aug’s monthly Budget Statement will be released. In addition, Traders are reducing their bets to 22% from 28% for a September rate hike after Brainard’s comments yesterday.

Municipal Bond Market        
Munis continued to trade weaker on Monday with the long end facing the largest sell off.  Today should be quiet in the secondary as the market continues to digest the array of deals coming to market this week.  We could see some selling of shorter dated paper as customers raise cash to put to work in new deals.  Liquidity is scarce in the market right now with most BWs receiving only 1 or 2 bids.   There are still balances in deals that have priced over the past few weeks which should add additional pressure ot the primary.  Supply is significantly stronger this morning with $19bln on tap over the next 30 days versus $12bln on Monday.

PR trading has lightened up this week due to lack of liquidity.  We continue to see a significant amount of items out for the bid, however, very few items traded Monday.  PR 8’s continue to drift lower with bonds trading around $66F after trading in the high 60s a few weeks ago.

30 Day visible supply: 19.8bln