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发表于 2011-9-17 13:16
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Current situation
3 F: m2 s$ Q" [ The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long$ B3 M8 Z- F; m* N6 n' z
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may2 \" m2 f% ?- a; D7 `
impose liquidation values.
. p# ~7 U" U; H( }3 o! m In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
' [4 f" e2 S" E0 G0 t3 T gAugust, we said a credit shutdown was unlikely – we continue to hold that view.9 E9 P& V/ _7 P. f
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
) u7 T# q4 B# |/ f+ Bscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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A look at credit markets
* J: j8 t. \. s! N3 X/ c7 z, b% Z Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in& n7 X; X( t1 h) a" g1 I
September. Non-financial investment grade is the new safe haven.0 l+ X+ j' Y# o7 k8 I$ U: S: w
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%+ v6 M* b% E: R: ?
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
" _+ K3 o( m4 L2 z; Kbillion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
2 Z( s I: Q% s6 y: s3 haccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade
* g3 q- y% W- a7 Q- r4 H# rCCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are$ Z5 |) K2 [1 U j, X
positive for the year-do-date, including high yield.
; Y' F- c; l2 q* X* }. C1 k6 i Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
, I& m' r9 i" y# p) c4 c: dfinding financing.
% m7 L# D- L7 s" a4 a Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they, M# P6 e0 e# }9 U* {" K* e
were subsequently repriced and placed. In the fall, there will be more deals.
$ L, w! w( O1 X9 y1 B) D" W Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
I. v1 D! r4 F4 Y$ zis now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were* m4 L% A5 o: S: I' `
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for0 P* b. x0 {2 l* L. n* ]
bankruptcy, they already have debt financing in place.) m- T2 d# u1 f. h) ]
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
4 x- h- D7 x0 t G3 f+ }today.8 n# A8 v, X6 B7 Z9 K9 p; f
 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in* v' k+ w( J8 y1 w) {/ _
emerging markets have no problem with funding. |
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