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发表于 2011-9-17 13:16
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Current situation
/ r$ G! ?& u3 q The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long6 o N! v! y& V' E8 _7 ?( n$ g
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may: p* _6 }) _4 b+ V% H4 |
impose liquidation values.
' ?8 e4 b2 o( b9 h6 y( _ In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
! f8 J$ F5 {! V! ?0 r/ I- dAugust, we said a credit shutdown was unlikely – we continue to hold that view.
% S9 f: y* b9 ` v" d# D The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
! W) j) `6 k _) l+ k2 qscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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* y% R7 L& k C# q! QA look at credit markets4 X2 E. {( e; e7 {2 c. I2 V5 o; f
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
6 O3 f, J& }6 e$ I; t# S U# VSeptember. Non-financial investment grade is the new safe haven.
$ |, `, D0 E4 _1 Y High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%
* @. G5 t4 G r3 J( Vthen, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1/ L4 j4 C- t9 \6 c
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
, a& `. P2 ~+ w' T9 g: |access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade, J5 U, g0 s Y3 K
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
- {' ^9 b8 W1 f* {5 s% Dpositive for the year-do-date, including high yield.
H, {" m8 Q5 j Mortgages – There is no funding for new construction, but existing quality properties are having no trouble7 U9 c2 d6 b$ c8 s
finding financing.' ^! u9 b/ E- }
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
9 W# Y( n% W! g3 i0 rwere subsequently repriced and placed. In the fall, there will be more deals.. s4 N+ ~1 }6 X( M- N; z
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and! V. m# ~* z! p+ n5 W: D
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
9 i+ w, W2 g/ s- Rgoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for- G9 @ G, x/ o b1 K
bankruptcy, they already have debt financing in place.
3 c1 x' T( s! Q! I European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain3 F3 u1 n& k7 m
today.
. v% ^/ }, P e a. X+ Y Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in5 l/ d* ~ ]- ^
emerging markets have no problem with funding. |
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