Friday, September 2, 2016

Corporate Bond Market

US Equity Futures are up to start the day with the DJ Futures +47 and the S&P Futures +5. The global tone is positive with European and Asian equities trading higher through the overnight. Oil is up to $43.6/ barrel and rates are showing strength with the 10yr Treasury up to 1.553%. Credit is wider with the Invest Grade Index showing 73.894/74.327 and cash is firm.

In credit news, it was a fairly dormant week in new issuance. August’s primary market saw $139.64b priced in Investment Grade Credit and $19.535b in High Yield Credit. IG issuance consensus for September 2016 is $126b.

In economic data, the US Jobs Report for August tallied 151k missing the 180k estimate.

Municipal Bond Market

Thursday’s market activity was fairly muted as investors awaited this morning’s payroll situation report and Labor Day weekend vacationing commenced.  Yields were mostly lower across the curve with the front-end underperforming.  2017 saw a 7bp increase in yield while 2Y, 5Y, and 10Y saw a 6bp, 3bp and 2bp increase, respectively.  Treasury ratios saw sever underperformance in the 2Y sector as ratios increased from 77% to 85%.  5Y ratios increased by 2 ratios from 73% to 75%, 10Y ratios increased 1 ratio from 91% to 92% and 30Y ratios remained unchanged @ 95%.

Investors remain searching for yield as spreads between AA and A rated credits remain fairly compressed.  Initial reports that the new oversight board was viewed as bondholder friendly reversed course and now are viewed by many as not bondholder friendly.  As a result, insured PR paper remains a focus of investors while non-insured paper continues to drift wider.  High grade investors continue to focus on specific duration targets and continue to absorb new issue, leaving the secondary market in apathy.  According to Bloomberg, trading volume was down 14.1% week-over-week.  Have a safe and happy Labor Day weekend!