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发表于 2011-9-17 13:16
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Current situation
% r7 v$ E s( q3 y2 c5 f The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long" ~/ x% v7 G) V3 Q" D/ Y
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may; m; _! L" h, N
impose liquidation values.
' X4 v/ x7 G! {! U3 @2 L% p7 x In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
* C. b5 |+ Q Z2 K- MAugust, we said a credit shutdown was unlikely – we continue to hold that view.
7 P# A. h" w2 ]: i2 a; @ The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
. r7 T! C; \, |+ N9 yscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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. s$ q# a T# bA look at credit markets% N$ h Y$ U2 C0 J8 g
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
, I- K4 y1 p/ v9 o {; \September. Non-financial investment grade is the new safe haven.
5 t+ O5 R8 p2 x% o& d High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%; g/ z& h: Q! f' D
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $19 P( a5 v8 D* C$ ~1 }/ F! c
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
9 ?4 n# i( Y, @2 l2 uaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade& c+ b+ g# `# {& S7 r/ w. ^1 x3 Q
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
4 X- F8 D3 G xpositive for the year-do-date, including high yield.9 t, A1 n1 [7 d o7 A/ K' I* `7 C* |
 Mortgages – There is no funding for new construction, but existing quality properties are having no trouble4 ^+ Y; T; v# x
finding financing.9 u% U! G; s" c
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
' H+ Y* K) A* z: Pwere subsequently repriced and placed. In the fall, there will be more deals.- U/ G4 k Q; W/ ~
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
4 k8 F. G5 {. \5 d. wis now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
& \& {9 k5 ^5 Ygoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
. p0 ~7 u$ v" R( v* Bbankruptcy, they already have debt financing in place./ B% Z2 \3 O5 k3 W# ]" v
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
0 s( U/ f' q- |today.
% m* t, ~: I! j Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in7 Q3 G; L {$ J7 Q
emerging markets have no problem with funding. |
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