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发表于 2011-9-17 13:16
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Current situation( o; D9 f4 i2 T
 The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long4 B$ x5 A) y8 ^9 V2 `. n
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may5 K" ^- u3 \- ~! R# }
impose liquidation values.
+ J+ E% J- }) E0 Z- E! P In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In9 _5 z! T# m2 u5 I1 A2 o# p, n. U
August, we said a credit shutdown was unlikely – we continue to hold that view.
1 o% d6 Q8 C5 C9 C* l The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension3 g+ W# }+ y- h2 U0 t
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.% v2 f% H3 f# v- {6 v
4 N$ i5 }% h# @: |A look at credit markets" e8 `4 ?! {" n6 m3 ]6 p5 f$ g* ~
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in2 J/ z. @. r" o2 Y8 o' R2 Y8 A% K
September. Non-financial investment grade is the new safe haven.
0 ~6 k. u3 _6 G High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%# ^" B" F: D6 q6 ?& O' C) @
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1$ I5 p; z" \2 N% c+ c- d7 L) W8 X1 Q
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have/ G: Q5 F9 ]! f' f" w/ ~! F
access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade; G& ?+ u4 ?0 ?
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are! U# B6 E. E$ T: n. A4 l
positive for the year-do-date, including high yield.% j' I7 E& x- V2 ~) i. B
 Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
2 I. \# k, {& h7 R4 ]( f( L, Lfinding financing.% ?" X: L6 i! \: {
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
) J# c/ O" k; H4 _) zwere subsequently repriced and placed. In the fall, there will be more deals.
: A# x8 H& @" o8 B Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
: {" \1 w% p4 z+ a: \5 ]is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
' V+ r3 K# v1 |5 q& J8 f/ |/ {going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for' q, @! t E2 s2 v0 z8 p; G# n. {
bankruptcy, they already have debt financing in place.* ~% h' f$ o- o2 ]* g+ s$ h
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain# a4 m) u3 H G" R& O
today.
7 c$ ~* P; ]/ b: n% [ Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in' Y9 D) ^0 j* h; T! w) I" S2 M
emerging markets have no problem with funding. |
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