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发表于 2011-9-17 13:16
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Current situation
) X) `* Y% Y6 z( P+ G% V( P The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long( l, i& b7 Y- d+ H
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may
1 \5 k. r1 u/ ]0 Z. K. I) n$ Jimpose liquidation values.$ L/ m" F) R, \0 x: e* Q
 In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In% c) t; e0 M" Z, k
August, we said a credit shutdown was unlikely – we continue to hold that view.
{6 \% p0 L1 Y5 n* M The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension2 E: h8 F+ \! g2 R4 ~8 S4 R6 |
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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A look at credit markets. X3 w6 {3 p% G( k8 A$ P% m- E
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in6 ~) T/ Q* e3 G3 g) Z* N
September. Non-financial investment grade is the new safe haven.5 r, ~; a R! }$ z
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%5 Q! {4 g2 y& Y8 ]6 O) ~6 ^
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $13 i& @0 f D, C# r. W. `
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have% ^. R- w$ I, |, H
access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade
' Q% e1 V7 m8 f6 }3 N9 zCCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are0 k' i9 U1 e+ o7 n9 a! l: |
positive for the year-do-date, including high yield.& y+ U+ L9 t! l5 N2 f1 ]: u% v7 M) t
 Mortgages – There is no funding for new construction, but existing quality properties are having no trouble0 |5 y( e h. n `$ P; g
finding financing.4 N! s+ L( O4 O7 q2 A5 e B3 p
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they$ ~5 R' S0 j; [. s: M0 A; I' F
were subsequently repriced and placed. In the fall, there will be more deals.
2 g+ z1 _$ `/ l& U! j Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and- C, p2 L" @3 w& ~
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were9 o. i; o0 ]) I( [4 Q8 \
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
* p7 T9 z" d, Y+ S0 x$ Lbankruptcy, they already have debt financing in place.
7 N8 N, R9 A. R' g: c! O European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
5 [! H3 ^3 [: T* H: k3 y! xtoday." K) Q& d* I8 v3 m" t
 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
4 `! @/ G( d0 W# iemerging markets have no problem with funding. |
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