Wednesday, May 31, 2017

Corporate Bond Market
US Equity Futures are up to start the day with the DJ Futures +25 and the S&P Futures +3.50. The global tone is strong with overseas equities trading higher through the overnight. US Treasuries are weaker with yields on the 10yr last at 2.222% and oil is down, last quoted $48.37/barrel. Credit is tighter with the Investment Grade Index showing 43.71/45.16 and cash is wider.

In credit news, Tuesday’s primary market saw $3.175bn priced in Investment Grade Credit. From yesterday’s new deals, we are active in First Republic. Hertz is expected to bring $1bn deal today to conclude the month.  

In economic data, Mortgage Applications fell 3.4%. April’s change in monthly Pending Home Sales will be reported this morning followed by the Fed Reserve’s Beige Book this afternoon.

Municipal Bond Market
Munis finished stronger yesterday as traders waited for the bigger deals to come to market this week. The yield on the 10-year benchmark muni dropped two basis points to 1.93% bringing the 10-year muni Treasury ratio up to 87.2%. The municipal supply is expected to be $4.83 bn for the current week with $3.28 billion being negotiated deals and $1.55 billion being competitive. So far this week we saw Citi price the Houston Independent School District’s $149.955 million of variable rate limited tax schoolhouse bonds in a deal backed by the Permanent School Fund Guarantee Program and rated AAA by Moody’s and S&P. The deal came to market as a bullet maturity in 2039 to yield 1.17% with a 3% coupon and a tender date of July 1, 2019 with a 7.00% step rate. The largest deals in the primary market are scheduled for today and Thursday. On Thursday JPMorgan is set to price the Duke University Health System Inc.’s $600 million of taxable bonds in a deal rated Aa2 by Moody’s and AA by S&P and Fitch. We will also see Morgan Stanley price Connecticut’s $370 million of state revolving fund general revenue bonds in a deal rated AAA by Moody’s, S&P, and Fitch. Barclays Capital will price the Connecticut Health and Educational Facilities Authority’s $250 million of revenue bonds for Yale University in a deal rated AAA by Moody’s and S&P. Lastly, Merrill is set to price the Louisiana Local Government Environmental Facilities and Community Development Authority’s $250.885 million of Women’s Hospital Foundation Project refunding revenue bonds in a deal featuring both taxable and tax-exempts. This deal is rated A2 by Moody’s and A by S&P and is also scheduled for Thursday.