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Warnings from the corporate bond market Replies |
diesel
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 Posted: Tue Jun 01, 2010 11:18 pm Post subject: |
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I moved from a negative bias going into the weekend to a positive bias into the close today. Looking to get more exposure to the long side on any weakness. With China and Europe showing jitters its up to the US to lead the way now... Still like the NOK on the long side.
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rffrydr
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| Posted: Tue Jun 01, 2010 7:38 pm Post subject: |
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No run into treas this time on the close. My euro-preferreds neutral to up. PGF, popular hedge was down less than Dow. Euro and euro/yen still holding last week's low. The euribor is going to hit only those leveraged to short-term turnover--after two years of deleveraging and capital raising. Indeed most of those bloated CDO mortgage holdings in Europe are generating dollar streams--which have just been boosted by 20%. With no hit on crude thus far.
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Ven
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rffrydr
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| Posted: Wed May 26, 2010 10:59 am Post subject: |
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More oil money which, yes, is still priced in dollars.
Tom Graff
Goldman selling debt
5/26/2010 12:33 PM EDT
| Quote: | Goldman coming with a very surprising new 10-year bond issue today. Probably coming at +280, which is pretty attractive given that the 5.375 '20 traded as tight as +250 today. Supposedly someone to Goldman wanting $750 million of GS bonds and Goldman is happy to oblige. I expect the deal to get to $1-2 billion before they close it.
The interesting color of it is that a single buyer wanted $750 million. Almost has to be a foreign government. |
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rffrydr
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| Posted: Wed May 26, 2010 8:47 am Post subject: |
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Cash is king
Published: May 25 2010 15:02 | Last updated: May 25 2010 19:36
| Quote: | Bond bears must be growling at the moon. All year they have been warning that the bull market in sovereign debt is over. To be fair, their reasons for thinking so seem sensible. Fears over government finances are spreading. Nominal interest rates can go no lower. Yet bond prices keep rising – the yield on 10-year Treasuries has dropped a further 70 basis points since the beginning of the second quarter.
That is the odd thing: the more the woes in Europe prompt a crisis of confidence in government bonds, the more investors want to pile into them as an asset class. This would be understandable if a prolonged period of deflation was expected or if there were no alternatives. US consumer prices for April were disconcertingly weak, actually falling quarter on quarter. But inflation indicators are not pricing in longer-term deflation in America or Europe. Emerging economies are struggling with the opposite problem. |
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rffrydr
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| Posted: Wed May 26, 2010 7:07 am Post subject: |
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Didn't get that Lincoln Ammend. pop on monday as I expected....but showing up today. Note: you could see it was Citi and MS in trouble from the shot of "The 13 bankers" coming out of the infamous White House meeting. Pandit and Mack were walking together.
Tom Graff
Credit opens strong, financials on fire
5/26/2010 7:54 AM EDT
| Quote: | Credit spreads are opening 1-5bps better in most names. However financials are absolutely on fire. Two developments late last night are helping the cause. First, Barney Frank came out against the Lincoln rule, which could force banks to spin-off their derivatives trading business. Just about everyone other than Senator Lincoln agrees this is a terrible idea, but Frank's opposition should finally be the death of this amendment. Frank's cred with the left is unassailable, so his support severely diminishes any populist benefit one might get from supporting this amendment.
The second is the softer tone coming out of S&P in regards to the banks. I wrote earlier that any downgrades wouldn't come until months after Finreg's final passage. Word on the street is that this will give banks time to raise capital or take other actions to avoid deep downgrades. This is critical, as the senior rating for all of BAC, MS, GS, and C is currently "A". There is a big difference between the required collateral that would need to be posted against derivatives contracts should any of these firms be downgraded below A-. Like I said earlier, I think BAC and GS are in the best shape.
Last senior unsecured ratings action on major financials by S&P (all downgrades)...
J.P. Morgan: 12/19/08
Citigroup: 12/19/08
Morgan Stanley: 12/19/08
Goldman Sachs: 12/19/08
American Express: 12/19/08
Bank of America: 3/3/09
GE: 3/12/09
Hasn't a lot changed since these dates for the better? best shape to keep their rating where it is. MS and C have a lot of work to do. |
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rffrydr
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| Posted: Tue May 25, 2010 11:13 pm Post subject: |
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TEI's May 6th bottom looking better and better. Ditto CMBS.
"Credit Insights" is caught in its "Roubini Moment" having some success in sniffing out the metaphor that is credit early. The assumptions pile on--and take no account of various government contributions still in place. The stress tests have been run.
Fannie and Freddie debt is huge--and it's backed by huge assets.
This article is a good summation of recent fears I'll say. Libor is not an issue other than we've taken out the levered player. --Which is ultimately what we want, no? My take is that credit is sitting on their bonds letting light volumes dictate. That is exactly what you're supposed to do with credit...sit on it. The alarms all lead to CDS quotes. $1 Trillion on corp. balance sheets only encourages patience. Deflation isn't big enough now. Only climbing rates will cause serious disorganization. A flattening curve is causing a shakeout--but the banks, filled with LT Treasuries have just scored big on cap gains, apart from the differential. So too, China. Big cap gains, big currency gains...watch out europe, money is coming your way.
Even a fading china keeps X and FCX on coupon schedule for what passes as long-term investing these days.
It's hard staring at stuff priced to par compared to what the underlying companies were in '07. But what were the alternatives in '07? Many. Now there are almost none.
What if the truth were that the inflation we feared was the saving grace we require in this "Great Deleveraging." The bond vigilantes, like the anti-virus programs, deep down love and need what they hate...their opposite.
P.S. I'm bullish on yield; neutral on debt cap gains. I converted most my High Yield to mortgages first quarter and have just rolled back and re-entered some selective NAV discounted funds. I'm a content buyer of PGF and specific european bank preferreds I am staying away from American bank (excepted above) debt and EEM debt. Qatar is accumulating citi: Memories of bygone days fused with wickedly good Dollar un-crisis hedge.
Credit is the only place we've seen american retail. The shock will come when they find that a fund can't be "held-to-maturity." But for now that's not a problem.
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Ven
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rffrydr
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| Posted: Tue May 25, 2010 7:54 am Post subject: |
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Euro preferreds still doing okay:
Tom Graff
Capitulation day?
5/25/2010 9:48 AM EDT
| Quote: | One of the scary things about the credit markets is that we haven't seen any kind of capitulation yet. Today we are finally starting to see some real money selling. Not enough to call it a capitulation yet, but I'm watching closely.
Bank/finance paper 10-15bps wider. Most industrials at least 5 wider. Verizon/AT&T 7 wider. CDS outperforming cash, as there is some profit taking in synthetics.
2-year swaps another 6bps wider. Getting very ugly. |
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rffrydr
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| Posted: Mon May 24, 2010 2:15 pm Post subject: |
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Tom Graff
Credit markets mixed
5/24/2010 4:11 PM EDT
| Quote: | Can't call today's credit market "healthy" at all. Granted, in CDS most names were tighter. Opened weak but came back as stocks rebounded. Now going into the close CDS for financials are basically unchanged. High yield CDX up 1/4 point. Volume very light again, both in CDS and cash.
Cash bonds were mixed. Financials about unchanged, maybe a couple weaker. Bank of America 7.625 '19 are +249 bid. Last trade on Friday was +244. Goldman Sachs 5.375 '20 are +275 bid. Closed on Friday at +271. J.P. Morgan 4.95 '20 are +175 bid. Friday close was +173.
In consumer names, Wal Mart trading unusually heavy. The 5.8 '18 are +25, 5 wider from Friday's close. Other retailers moving similarly. Kraft 5.375 '20 are 5 wider at +162. In pharma, Abbott Labs brought new 5, 10 and 30-year bonds. Spreads were +70, +90, and +122 respectively. Hearing about 3 tighter post issuance.
Media outperforming other sectors, with most names 1-3 tighter. Telecom unchanged. True industrials trading very light. By the time they do the final tally, trading in Bank of America alone might eclipse the whole industrial sector. |
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