Percent. Current 1 month ago 1 year ago Source: Bloomberg, Piper Jaffray

Transcription

1 Market Commentary: Several weak economic reports raised concerns about the prospects for economic recovery in the near-term, and gave a boost to the Treasury market last week. The Conference Board's Consumer Confidence index dropped to a ten-month low of., down from.9 in January and well below the Bloomberg Consensus estimate of.. New home sales declined. percent from December to January compared with a consensus estimate for a. percent increase. The ongoing inventory build helped boost durable goods orders by. percent in January, double the consensus estimate. Initial jobless claims increased to 9,, well above the expected, level. By the end of the week, Treasury rates dropped significantly across the curve, with the two-year dropping basis points to end the week at.88 percent while the ten-year Treasury shed basis points for a. percent closing yield Percent Historical Yields Treasury ( year) Treasury ( year) Federal Reserve Chairman Ben Bernanke made it quite clear in his semi-annual testimony before Congress that the Fed is in no rush to raise rates. This week's main focus will be on Friday's employment report, although the series of storms that have hit the East Coast will likely create distortions in the report, leaving their significance open for debate..8.7 Treasury ( Year)... // // // // // Treasury Spreads Treasury Curve Spread Percent - Jan- Jan-7 Jan-8 Jan-9 Jan- yr vs yr yr vs yr yr vs yr..... Current month ago year ago Economic Calendar Monday, February Tuesday, February Wednesday, February Thursday, February Friday, February Last Revised Survey Actual Last Revised Survey Actual Last Revised Survey Actual Last Revised Survey Actual Last Revised Survey Actual Chicago Fed Nat Activity Index ABC Consumer Confidence MBA Mortgage Applications Initial Jobless Claims GDP QoQ (Annualized) % -8.% 7K 7K K 9K.7%.7%.9% Dallas Fed Manf. Activity Consumer Confidence New Home Sales Continuing Claims Personal Consumption 8.%.% -.%.9. K 8K K 9K K K 7K 7K.%.%.7% New Home Sales (MoM) House Price Index(MoM) GDP Price Index -7.%.%.% -.%.7%.%.% -.%.%.%.% House Price Purchase Index(QoQ) Core PCE QoQ.%.% -.%.%.%.% Durable Goods Orders U. of Michigan Confidence.%.9%.% % Durable Goods Ex Trans Existing Home Sales.9%.%.% -.%.M.M.M.M Monday, March Tuesday, March Wednesday, March Thursday, March Friday, March Last Revised Survey Actual Last Revised Survey Actual Last Revised Survey Actual Last Revised Survey Actual Last Revised Survey Actual Personal Income ABC Consumer Confidence MBA Mortgage Applications Initial Jobless Claims Unemployment Rate - -.% 9K 7K.7%.% Personal Spending Domestic Vehicle Sales Continuing Claims Avg Hourly Earning MOM All Emp 8.9M 8.M 7K.%.% PCE Deflator (YoY) Total Vehicle Sales Pending Home Sales MoM Avg Hourly Earning YOY All Emp.8M.M.%.%.%.% PCE Core (YoY) Pending Home Sales YoY Avg Weekly Hours All Employees.%.9.7 ISM Manufacturing Consumer Credit $.7B -$.8B Source: Bloomberg and Piper Jaffray March, This material is a product of the Fixed Income Services trading desk and should not be construed as impartial research or a research report.

2 Money Market Commentary: The SIFMA index reset this week at. percent three basis points lower in yield than last week. After seven weeks of outflows, tax-exempt funds saw $87.7 million of inflows this week,with total assets at $8.7 billion. Supply in the U.S. Commercial Paper market has decreased $ billion over the last three weeks, bringing us to a low not seen since the summer of 999. Activity in the Yankee CD market picked up modestly last week. Percentage Percentage 9% 8% 8% 7% SIFMA & LIBOR Swap Curves Libor Sifma Swap Curve SIFMA Swap % of LIBOR 9% 7 Year Sifma Swap % of Libor LIBOR Curve.8 SIFMA Municipal Swap Index Libor Curve Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 SIFMA Municipal Swap Index Source: Thocmson MunicipalMarket Monitor Nov-9 Dec-9 Jan- Week Avg Feb- Fed Funds Target Rate. Short Term Money Market Rates. Percent.. Q Q Q Q Q Bloomberg Weighted Average High Forecast Low Forecast Median. 9 8 Days 7 T- bill Discount Notes Dealer CP Top Tier

3 Agency Market Commentary: On-the-run Treasury/Bullet Agency Yield Curves Last week agency spreads held steady in light volume trading. The Federal Reserve completed another round of GSE purchases, this time targeting maturities from March to January. The Fed bought a total of $978M out of $.B tendered. The cumulative total is now $9.B of the targeted $7B. They also announced a change in operation to be every two weeks, so look for only two more GSE purchase operations to get to the targeted amount. FNMA announced much-anticipated supply on Thursday. They reopened the FNMA. / via auction by $B and announced a new two-year Benchmark. Books on the deal saw large demand right from the start as the Street has been without new tradeable supply since early January. The $B deal priced at +/yr and quickly tightened to +9/yr after it freed up. Treasury Secretary Geithner said the government will work to address Fannie and Freddie in and Barney Frank postponed the House Financial Services Committee meeting that was scheduled for next Tuesday until March... Jan- Feb- Apr- May- Jul- Sep- Oct- Dec- Feb- Fed Fund Futures Eurodollar Futures Percent Bullet Agency Yied Curves Swap Curve On-the-run Treasury Bermudan Spreads (Callable on specific dates) NC-mo NC-mo NC-yr NC-yr NC-yr Year Spread Coupon Spread Coupon Spread Coupon Spread Coupon Spread Coupon Current month ago year ago.7.. month month month year Discount Notes Libor European Spreads (Callable one time only) NC-mo NC-mo NC-yr NC-yr NC-yr Year Spread Coupon Spread Coupon Spread Coupon Spread Coupon Spread Coupon March,

4 Mortgage Market Commentary: The driving theme this week is going to sound a little like a broken record the Fannie Mae and Freddie Mac delinquent loan buyback program. The main cause for consternation this week was how long it would take Fannie Mae to complete their buybacks. Freddie Mac stated that their program would be complete in March, but Fannie Mae said that they would be buying out the seriously delinquent loans over the next few months. Why does this matter? Dealers have been adjusting their expected prepay models and seem to have failed to take into account the effect of the longer buyback period. So, once again, higher coupon year mortgages.s and higher got sold fairly aggressively and lower coupon s and lower were the beneficiaries of dealers trading down in coupon. Since the buyback was announced on Feb 9, -year.s have gone down by / nd and -year s have been unchanged. -year.s are up 8/nds. In summary, we expect high prepays to last until May on higher coupons. Structured MBS product like PACs with lockout still are a great way to avoid this prepay speed bump! 8 FNMA ( Year)/ Treasury ( Year) 8 FNMA ( Year) / Treasury ( Year) Jan- Jan-7 Jan-8 Jan-9 Jan- Year FNMA Treasury Year Year FNMA Year FNMA Coupon.. Coupon.. Price Price PSA 7 9 PSA Yield Yield Average Life Average Life Spread 7 Spread 9 8 March, Jan- Jan-7 Jan-8 Jan-9 Jan- Year FNMA Treasury Year

5 Taxable Muni Market Commentary: Taxable munis languished to start the week with market participants seemingly apathetic, perhaps a hangover from the previous holidayshortened week. However, the market finished with a much better tone and spreads rebounded to close the week. The largest deal of the week was a $M State of Maryland GO competitive deal that priced +/-year in as a make-whole. Dealer arbs and other trading accounts were better sellers to start the week and money managers and UITs became better buyers to finish. Next week features a $+ billion MEAG nuclear deal and a $M Kauai, HI Piper Jaffray deal. Benchmark Issuance Issue Date Issuer Rating Maturity Coupon New Issue Spread // Indianapolis Loc Pub Imp Bd Bk BABs Aa/AA+ //. /8/ Los Angeles USD ULTGO BABs Aa/AA- 7//.78 // EAST BAY CA MUN UT DIST WTR SYS RV Aa/AA //.87 // CLARK CTY NEV AIRPORT REV Aa/AA- 7//.8 // METROPOLITAN TRAN AUTH N Y A/A //9.8 /8/ ILLINOIS ST A/A+ // /7/ MISSOURI HR ED LN AUTH STU Aaa/AAA // Var 8 // NEW YORK CITY MUN WTR FIN Aa/AA+ //.9 // FLORIDA ST BRD ED Aa/AAA //9. 9 // PENNSYLVANIA ST Aa/AA //. Source: Piper Jaffray Piper Pricing Par (s) Issuer State Role Deal Type N/C Date Piper Taxable Municipal Underwritings,9 Howard County Consolidated Pub Improvement MD Sr. Mgr Sole Competitive / 7,8 Alaska Municipal Bond Bank GO B- AK Sr. Mgr Syndicate Negotiated /,7 New York Institute of Tech Tax Rev Ser A NY Sr. Mgr Syndicate Negotiated /8 Negotiated Calendar 8,8 Stafford Cty IDA City of Staunton BABs B Rev VA Sr. Mgr Sole Negotiated / 7,8 Stafford Cty IDA City of Staunton BABs E Rev VA Sr. Mgr Sole Negotiated /,7 Stafford Cty IDA City of Staunton RZED A Rev VA Sr. Mgr Sole Negotiated /,8 Stafford Cty IDA City of Staunton RZED D Rev VA Sr. Mgr Sole Negotiated /, Vista RDA Taxable BANs CA Sr. Mgr Sole Negotiated /, Vista RDA Taxable Housing Tax Allocation Rev CA Sr. Mgr Sole Negotiated /, County of Kauai Series BAB/RZEDB GO HI Sr. Mgr Sole Negotiated / Source: Piper Jaffray Jan-9 Taxable Municipal Underwritings UNIV. OF VIRGINIA(BAB). 9 Mar-9 May-9 Jul-9 AAA Sep-9 Nov-9 Jan- Jan-9 UNIV. OF MISSOURI(BAB).9 9 Mar-9 May-9 Jul-9 AA Sep-9 Nov-9 Jan- Jan-9 Mar-9 Billions Jan-9 Feb-9 Taxable Municipal Monthly Issuance Mar-9 Apr-9 Source: Bloomberg & Piper Jaffray NEW JERSEY(BAB) 7. May-9 Jul-9 A Sep-9 Nov-9 Jan- May-9 Jun-9 Jul-9 Aug-9 Sep-9 8 Oct-9 Taxable Bond Issuance Jan-9 Mar-9 Nov-9 Dec-9 CALIFORNIA 7. 9 May-9 Jul-9 BBB Sep-9 Jan- Nov-9 Feb- Jan- CONNECTICUT.8 ILLINOIS. Jan-9 Mar-9 May-9 Jul-9 AA Sep-9 Nov-9 Jan- Jan-9 Mar-9 May-9 Jul-9 A Sep-9 Nov-9 Jan- GEORGIA (BAB). NEW YORK. 9 ILLINOIS.9 CALIFORNIA. 9 7 Jan-9 Mar-9 May-9 Jul-9 AAA Sep-9 Nov-9 Jan- Jan-9 Mar-9 May-9 Jul-9 AA Sep-9 Nov-9 Jan- Jan-9 Mar-9 May-9 Jul-9 A Sep-9 Nov-9 Jan- Jan-9 Mar-9 May-9 Jul-9 BBB Sep-9 Nov-9 Jan- ILLINOIS. CALIFORNIA. Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan- Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan- A BBB Source : Bloomberg, Piper Jaffray

6 Tax Exempt Municipal Market Commentary: Municipals continued the slow grind higher again last week with ten-year and shorter muni yields four to five basis points lower by the end of the week, while the longer end of the curve rallied two to three basis points. Tax-exempt and taxable muni new issues that came last week via competetive sale continued to be priced at very aggressive levels. Investors remain cautious and selective at current yields and ratios, but the constant pull of supply to the BAB market and the potential that the program could be made permanent has helped keep a bid to the market. Muni investors have focused their attention on relatively short duration paper; primarily -years and shorter. There could be a number of Texas Public School Fund deals in the market as early as this week which would offer investors an opportunity to buy some quality tax-exempt paper at perhaps a bit better spread to the benchmark curve than has been available for some time. Municipal Underwritings Piper Pricing Par (s) Issuer State Role Deal Type N/C Date 9,77 State of Montana Adj Tend Op INTERCAP Ser MT Sr. Mgr Syndicate Negotiated / 8,7 Cumberland Cty TAN Series ME Sr. Mgr Sole Competitive / 8, Sioux City GO Ref Series A&D IA Sr. Mgr Sole Competitive /,7 Tustin RDA Tax Alloc Housing CA Sr. Mgr Sole Negotiated /, Oregon Facilities Auth Rev Samaritan Health OR Sr. Mgr Syndicate Negotiated / 7,8 Alaska Municipal Bond Bank GO A BQ AK Sr. Mgr Syndicate Negotiated /,8 Pittsburg USD GO Ref CA Sr. Mgr Sole Negotiated /,79 Vincennes Univ Student Fee Ref Ref J IN Sr. Mgr Syndicate Negotiated /, Fowler USD GO Election of Ser B CA Sr. Mgr Sole Negotiated / Negotiated Calendar 9, Belton ISD UTGO Tax School Bldg Bonds TX Sr. Mgr Syndicate Negotiated /, City of Cape Girardeau Special Oblgn Ser GO MO Sr. Mgr Sole Negotiated /,89 MO DFA Independence Events Center Project REV MO Sr. Mgr Sole Negotiated /, La Marida Redevelopment Agency REF Ser A REV CA Sr. Mgr Sole Negotiated /,8 Stafford Cty IDA Dity of Staunton Ser C REV VA Sr. Mgr Sole Negotiated / 8 Stafford Cty IDA City of Staunton Ser F REV VA Sr. Mgr Sole Negotiated / 8,97 MNTAAB Aid Anticipation Ser A COP MN Sr. Mgr Sole Negotiated / Cass Cty PWD#7 Equipment Lease Purch COP MO Sr. Mgr Sole Negotiated / 7, Hallsville ISD UTGO Sch Bldg Ser A&B GO TX Co-Mgr Syndicate Negotiated / Focus Competitive Issues, Iowa City Swr Rev Ser A REF IA / 7,9 Osseo ISD #79 ULTGO MN /, Champaign ULTGO MN / Largest Negotiated Issues 7, NYState Dorm Authority PIT NY /, University of Texas TX / Source: Piper Jaffray AAA GO Vs Treasury AAA GO Municipal Curves 8 Current Month Ago Year Ago Benchmark Municipal Rates AAA GO AA GO A GO BAA GO Day Visible Supply $US Billions Basis Point Jan- Jan-7 Jan-8 Jan-9 Jan- Year year Year Maturity (years) Municipal Yields vs Treasuries Treasury AAA AA A BAA Spread % of Spread % of Treas Yield Yield Yield Spread % of Yield Spread (BPS) Treas (BPS) Treas (BPS) Treas (BPS) % of Treas.. - 8%. %.7 7 %.9 %.8.7-7%.7-8%. 9 %. 7 %..8 - %.9-9 7%. 9%.8 8 % %. - 7%.8-9%. % %. -9 8%. %.87 7 % %. - 8%. 9 %. 8%..8-88%.98-9%.9 8 %. 8% %. - 9%.8 7%.77 7% // //9 -Day Avg 9 Low 9 High March,

7 Corporate Market Commentary: Flow was generally light this week, as lower Treasury yields and uncertainty regarding the direction of spreads pushed many buyers to the sidelines. On balance, spreads finished up moderately wider in most sectors. The IG five-year CDS index is closing about two basis points off Monday's levels. Once again, the bank and brokerage sector remained volatile as the strength of the economic recovery remains under debate. Economic numbers released this week were generally on the weak side, and equities struggled to make any real traction. Corporate spreads generally followed suit. Spread CDX Yr Corp Investment Grade Index Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan- Industrial sectors fared a little better this week. We saw some continued buying in the retail and health care space, especially during the middle of the week when spreads widened. There was enough dip buying to move those sectors back toward unchanged on the week. The new-issue calendar was rather sparse. On Thursday, Comcast priced $.B of - and -year notes. Earlier in the week, United Technologies priced $.B of new debt. Overall, total issuance was about $.B. For the month, issuance was BAC GS $B, the lowest total for a February since. 9 9 Number of Entities Q-9 Q-9 Q-9 Q-9 Q- Source: Standard &Poor's, Piper Jaffray Upgrades Downgrades CISCO WMT May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan- Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan- Feb- Nov-9 Dec-9 Jan- Feb- Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan- Feb- 9 9 Apr-9 May-9 Jun-9 Jul-9 JPM Aug-9 Key New Issues Pricing Date Issuer Rating Coupon Maturity New Issue Current Spread Spread Issue Size ($ in Mil) // United Tech Corp A/A. // 87 77/7 $, // United Tech Corp A/A.7 // 9 / $, // Comcast Corp Baa/BBB+. // 7 $, // Comcast Corp Baa/BBB+. // 8 $, // Enbridge Energy Baa/BBB. // / $ Sep-9 Oct-9 Nov-9 Dec-9 Jan- Feb- 9 9 Aug-9 Sep-9 Oct-9 GE Nov-9 Dec-9 Jan- Feb- 9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Pfizer Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan- Feb- 9 8 Feb-9 Mar-9 Apr-9 May-9 Jun-9 AT & T Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan- March, Feb-

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