Tuesday, January 3, 2017

Corporate Bond Market

US Equity Futures are strong to start the year with the DJ Futures +150 and the S&P Futures +18. Overseas equities are trading higher through the overnight. Oil is up to $54.92/ barrel and rates are weaker with the 10yr Treasury last at 2.5%. Credit is firm with the Invest Grade Index showing 58.82/59.62 and cash is also tighter.

In credit news, December’s primary market drifted with a tally of $46.075bn vs the $48bn estimate. 2016 accounted for $1.61tn in new issue Investment Grade Credit. High Yield had its busiest December since 2013 with $19.19bn priced. The 2016 tally for High Yield Credit is $229.976bn. There are deals announced from: Barclays, BNP Paribas, Credit Agricole, Duke Energy, Rabobank, Santander UK, and Westpac Banking to kick off the new year.

In economic data, there are a few announcements scheduled for today. First, Markit US Manufacturing PMI will be released followed by the ISM Manufacturing PMI and ISM Manufacturing Report on Business Prices Index. Also, November’s Construction Spending will be announced.

Municipal Bond Market

Munis rallied to close out the year as investors looked to put money to work ahead of January reinvestment mixed with an aggressive tax swap season.  We saw buying across the curve; however, the long end certainly seemed to outperform the rest of the market with aggressive buying of 4 & 5 coupons.  Demand should continue into this week with a light new issuance calendar of only $3bln and money still on the sidelines that needs to be put to work.  This week’s calendar is mostly comprised of higher education names with deals coming from the University of Texas, University of Pittsburgh and University of Connecticut.  We believe that we should see strong demand in the primary as customers look to put some money to work.  30 day supply is $9.6bln this morning.

PR paper ended the year unchanged from levels that we saw in early December.  Demand was significantly lighter to end the year after outperforming the market for most of 2016.  We saw nontraditional PR buyers step into the market throughout the year which accelerated the rally in insured paper.  PR 8’ of 2035 continue to trade around $67.50 (11.86%) and should remain at this level until we receive more clarity out of the commonwealth.

30 Day visible supply: $9.6bln