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发表于 2011-9-17 13:16
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Current situation
: h) ^4 i3 b5 L$ ?6 A The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long; c! o# m& r* ?, x0 d
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may+ @# d+ V/ O9 o G# G
impose liquidation values.0 j: m* d! G! F+ e R1 D% ^
 In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In# ]- N0 X" X+ {4 A4 [
August, we said a credit shutdown was unlikely – we continue to hold that view.
8 l# D. t* F4 O1 l+ P) r: v+ ` The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension9 E0 ^1 m! w* W5 R: }9 a2 h+ A- J
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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A look at credit markets1 R. H$ N( N# Q b, x2 O& m( m
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in* j1 y+ l6 H6 e/ R" M
September. Non-financial investment grade is the new safe haven.4 W/ d( }1 x0 r# p
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%* T9 w$ x- c+ p2 w% B
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
, {* }% k! g; Y$ d' t" U3 y# vbillion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
8 }* l, z* T. v/ s6 Z5 ^! o: Jaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade( y8 \9 K- r$ O7 T& b( f
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
% K' U/ q# t: l R6 Ipositive for the year-do-date, including high yield.
- d, t, H: V( F0 E) @' o# q Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
, K* t8 x8 K. O! K' }; o6 g1 nfinding financing.* B2 I2 B3 C! D: W2 p% b' C
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they9 }( [' T2 ^' ^; a2 I, Y
were subsequently repriced and placed. In the fall, there will be more deals.
9 U6 ^0 I+ a# K9 L$ r c+ @$ X Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
$ _0 K! k' m' C: ]is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were7 H; J2 x. }# z& J/ _/ b6 g8 ?
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
7 l" g; O |2 c# b4 qbankruptcy, they already have debt financing in place.; n7 p& N3 c V$ J6 }* S2 r9 q
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain0 Z- |" I. P+ R" m2 D
today.) D+ L- `4 N. E( u9 g9 o! c
 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
d& `" f" W3 i6 @emerging markets have no problem with funding. |
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