Monday, August 14, 2017

Corporate Bond Market
Global equities are all in the green to start the session as fears of an imminent nuclear war with North Korea begin to abate. In Europe, the FTSE 100 is up 44.5 points, the DAX up 125 points, and the Euro Stoxx 50 up 40 points. Asian equities are also slightly higher with the Hang Seng up 6 points and the NIKKEI 225 up 20 points. US equity futures are up sharply and treasury yields are 1-3bps higher across the curve. Right now, people are talking about how U.S. Officials say another Korea War is NOT around the corner and how Trump has yet to denounce the nationalists in the Charlottesville incident. Amazon is also in the news today after hiring banks to hold fixed income calls for investors.

With respect to credit, high-grade bond sales are said to top $40bn for the second time in four weeks bringing August volume to $66.1bn and YTD volume to $1.093 trillion.  British American Tobacco (BAT) led issuance as it priced $17.25bn across 8 tranches. We’re expecting to see $14.675bn in issuance today and $19.475 tomorrow. Investment grade 5 years out is tighter and high-yield 5 years out is also slightly tighter this morning.

Municipal Bond Market
Primary muni market volume is expected to increase to $6.7bn from a revised total of $5.57bn sold last week. The biggest deal of the week will be Maryland who will issue $1.34bn in 2 competitive sales. The deal, which is rated AAA by all 3 agencies, will include $550 million of Series A and $792.825 million of Series B GO and local facilities bonds. The largest negotiated deal of the week will come from the city and county of Honolulu, HI. On Wednesday Merrill will price the $411 million of Honolulu GO bonds which are rated Aa1 by Moody’s and AA-plus by S&P. For reference, the muni-to-treasury ratio was 86% on Friday as the yield on the 10-year benchmark muni GO was flat at 1.88%.