Thursday, April 27, 2017

Corporate Bond Market

US Equity Futures are up to start the day with the S&P Futures +3.50 and the DJ Futures +28. The global tone is mixed with European and Asian equities trading mixed through the overnight. US Treasuries are a bit wider with yields on the 10 yr at 2.309% and oil is weaker, last quoted $49.12/barrel. Credit is weaker with the Investment Grade Index showing 45.415/46.704 and cash is stronger.

In credit news, Wednesday’s primary market saw $10.2bn priced in Investment Grade credit and just 1 deal priced in High Yield for $300mn. From yesterday’s new deals, we are active in: Crown Castle, Credit Bank of Moscow, State Grid Overseas (CHGRID), and CSX. There are deals announced from: American Express, Pepsi, Energuate Trust, China Southern Power, Eagle Holding, Suncorp-Metway, and MHP.

On the earnings front: Ally Financial, American Airlines, Comcast, UPS, KKR, Ford, Marathon Petroleum, Dow Chemical, Under Armour, Bristol Meyers, and Union Pacific all announced earnings this morning that outperformed Wall St’s earnings expectations for Q1 2017 while US Steel, Cliffs, Simon Property Group, Southwest Airlines, International Paper, and Boston Scientific.

In economic data, there are a few key announcements scheduled for today. First, March’s Wholesale Inventories will be reported followed by Durable and Capital Goods Orders. Later on will be Jobless Claims, Consumer Comfort, and Home Sales.

Municipal Bond Market

The muni market saw a tremendous amount of issuance on Wednesday highlighted by deals from the LA Dept. of Water and Power and the Port Authority of New York and New Jersey. After holding a one-day retail order period, Wells Fargo priced $554.275 million of Port Authority tax-exempt consolidated bonds in 3 tranches across many different maturities. $250 million of the bonds were priced as 5’s to yield 2.27% in 2027, 2.44% in 2028, 2.66% in 2030, 3.07% in 2034, 3.14% in 2037, 3.28% in 2042, 3.35% in 2047, and lastly 3.60% and 3.55% in a split 2057 maturity. $254.275 of the bonds were priced as 2’s to yield 1.00% in 2017 and as 3’s to yield 1.12% in 2018. Bonds with a 5% coupon were also priced to yield 1.43% in 2020, 2.01% in 2023, 2.41% in 2025, 3.04% in 2030, 3.25% in 2033, and 3.45% in 2037. Yesterday Merrill priced $534.28 million of the LA Dept. of Water and Power revenue bonds for both retail and institutions. The bonds were priced for institutions as 5’s to yield 0.85% in 2018, 3.14% in 2038, 3.19% in 2041, and split 3.12-3.22% in 2044. Finally, there were 4% coupon term bonds maturing in 2047 priced at 3.6%. There are no significant muni issuances expected today.