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Category Archives: bonds and loans
Why Bonds are Unloved by the Media
Dear John Thain pleads with the financial media to stop with the stock-market obsession, already: The S&P 500 represents about $13 trillion (slightly lower, as of this posting). The bond market, though, is over $27 trillion dollars (a statistic from … Continue reading
Posted in bonds and loans, Media
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How the CDS Market Can Support the Bond Market
I’m glad that Equity Private quoted herself yesterday, because I missed this the first time round: Are we surprised when people point fingers at Bear and suggest, for instance, that they are buying up the underlying assets and loosening credit … Continue reading
Posted in bonds and loans, derivatives
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Never Lend Money to Gisele Bundchen!
Enrichetta Ravina studied 11,957 loan requests from 7,321 borrowers and concluded: Borrowers whose appearance is rated above average are 1.41 percentage points more likely to get a loan and, given a loan, pay 81 basis points less than an average-looking … Continue reading
Posted in bonds and loans, economics
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The Latest Argentine Default
Sovereign debt has long had a semi-fluid system of seniority, what Anna Gelpern calls a "seating chart". Back in the 1980s, countries were generally pretty happy to default on foreign bank loans. They occasionally defaulted to their fellow governments, too, … Continue reading
Posted in bonds and loans
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Misleading Chart of the Day: Credit Premia
Martin Wolf appends this chart to his most recent column. It shows the well-known-by-now interbank spread – the way that Libor has gapped out relative to central bank rates – and tries to decompose it into two parts: a credit … Continue reading
Posted in bonds and loans, charts, derivatives
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US Default Risk Soaring
Shorting subprime? That was a good idea. Or shorting agencies, or any other credit product, for that matter. But shorting US Treasuries in July? That, surely, would have been pretty disastrous. Unless, that is, you went short not directly, but … Continue reading
Posted in bonds and loans, derivatives
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Auction-Rate Securities: No Danger to Silicon Valley
It’s like Telephone (Chinese Whispers) in the blogosphere today. First there’s a sober report on Venture Wire warning that "cracks of the economy" might affect the VC industry: Perkins said VCs need to be aware of the "cracks of the … Continue reading
Posted in bonds and loans
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SocGen gets its New Equity Capital with Ease
The €5.5 billion SocGen rights offering has received more than €10 billion in demand, putting to rest any doubt about the bank’s ability to survive the Kerviel crisis – and also proving that banks have more options than simply running … Continue reading
Posted in banking, bonds and loans, stocks
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CDOs: Dead. CLOs? Not So Much
Vipal Monga takes a look at the CDO and CLO markets, and asks: are they really dead? Or just taking a breather? He draws the conclusion that they’re very different animals. CLOs, he says, are crucial to the loan market: … Continue reading
Posted in bonds and loans
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Please, China, Sell Your Treasury Notes!
One more post on Krugman, if I may, and then I’ll move on. Check out the chart he reproduced on Saturday: it looks very much like it comes from the Economist, but I can’t find the specific article. In any … Continue reading
Posted in bonds and loans, economics
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CDS: It’s Not About Credit
The FT has an excellent article explaining that corporate issuers are now being able to price new bonds off their illiquid secondary-market bond curves, rather than off their (wider) CDS curves. If you have real corporations borrowing real new money … Continue reading
Posted in bonds and loans, derivatives
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Credit Market Quote of the Day
An anonymous London credit hedge fund manager, quoted in the FT: "Every time you buy anything it is worth less the next day. Eventually you stop buying." In theory, hedge funds, with their cash lock-ups and their higher risk appetites, … Continue reading
Posted in bonds and loans
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Merrill’s Financing Strategy: Harming Shareholders
A bank issues a bond, which has a maturity date. When the bond matures, the bank needs to essentially roll over the debt: it issues a new bond for the same amount of money, at (these days) a higher interest … Continue reading
Posted in banking, bonds and loans, stocks
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Delphi: The Post-Default Aftermath
Were you someone who wrote credit protection on Delphi? If so, you’re feeling a bit as though you dodged a bullet write now. Alea reports: In 2005 when Delphi went bankrupt there was some fear of a short squeeze in … Continue reading
Posted in bonds and loans, derivatives
2 Comments
Auction-Rate Securities, RIP?
Do auction-rate securities have a future? I’m not sure myself, so I put a couple of questions to Floyd Newton, a partner in King & Spalding’s finance practice. Floyd has a long history in the auction-rate market, and seems to … Continue reading
Posted in bonds and loans
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Why Congress Can’t Fix the Ratings Mess
Credit ratings wonks will love the detail in Christopher Whalen’s interview with Drexel University’s Joseph Mason today. But my favorite bit is a remark near the beginning: Mason: I have been meeting with some large pension funds outside the US, … Continue reading
Posted in bonds and loans
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Municipal Ratings: S&P and Moody’s Diverge
The NYT does a very good job of moving the municipal bond ratings story forwards this morning – and making it the newspaper’s lead story, no less. One thing it does is answer my question for John Carney and provide … Continue reading
Posted in bonds and loans
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Credit Markets Aren’t Liquid Enough for a Mass Selloff
Jon Jacobs wants "an unrestrained, cathartic selloff" in the credit markets. He makes a good point: that banks are holding on to the assets they’ve written down in the hope, basically, that they’re smarter than the markets. The only way … Continue reading
Posted in bonds and loans
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Municipal Default Alert: Vallejo, California
Do municipal bonds really never default? The Californian town of Vallejo seems to have gotten very close. Portfolio’s Liz Gunnison filled me in on the details of the city’s bonds, from Bond Buyer: The city government and its related enterprises … Continue reading
Posted in bonds and loans
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No Security in Securities
James Stewart is shocked – shocked! – to find out that his ARPS aren’t liquid. They were sold as a liquid, safe, slightly higher-yielding, tax-exempt alternative to money-market funds. I should know, since I bought some… What was a ready … Continue reading
Posted in bonds and loans, personal finance
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Blackstone to Banks: We Don’t Need You
Blackstone has decided to disintermediate its banks when it comes to raising money for leveraged loans. Hell, Blackstone is a bank, I’m just surprised it’s taken them this long to take this step. Yes, it’s easier to just mandate a … Continue reading
Posted in banking, bonds and loans
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When Trusted Advisors Have Their Clients Over a Barrel
When times are good, investment bankers love to shower their clients with relationship guff. "We’re not just selling products," they say, "we’re building a relationship". They talk a lot about being a "trusted advisor," and the older ones might even … Continue reading
Posted in banking, bonds and loans
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Why Yield Spreads Aren’t the Same as Credit Risk
John Carney is one of those people who seems to think that if you’re contrarian you must be right. His latest broadside is directed against Jesse Eisinger, of all people; in it he tries to assert that there’s really nothing … Continue reading
Posted in bonds and loans
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Credit: The Bandwidth-and-Hamsters Analogy
I’m not entirely sure what to make of Yvette Kantrow’s column today. On the one hand, I’m the only person she’s remotely nice about (I’ve "done a decent job," she says) in her review of the way the credit crunch … Continue reading
Posted in bonds and loans, Media
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Chart of the Day: Stock-Bond Divergence
This is from a Goldman Sachs research report dated yesterday. The details: We compare the investment grade CDX spread to the implied volatility of a 25 delta put of an equal weighted basket of the stocks represented in the CDX … Continue reading
Posted in bonds and loans, stocks
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