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发表于 2011-9-17 13:16
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Current situation
1 T0 k% e- R- i8 r- ^. e The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long7 Q, Y& u2 L, m
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may0 Z0 B m8 k! R0 K1 d, h" M# s8 k1 u
impose liquidation values.
) B w* \: w0 X9 i4 t In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
3 W% a; u4 u9 J! YAugust, we said a credit shutdown was unlikely – we continue to hold that view.* ~: S) B7 Q6 v7 X& \; G9 c1 i
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension8 n0 Q5 ~- Q! r
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.% @" P( T5 L3 O$ U! y# i1 z- O
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A look at credit markets" w8 k, o& f" T; T- n. D8 g- a8 v# Z
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in: U! p6 t9 j7 q2 ^* K, K, r
September. Non-financial investment grade is the new safe haven.( I% q0 {( N+ L' f Q& q: `
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%8 i" s1 K! v3 {. ~6 M& k- t$ N
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1- U2 k/ X; N4 c. H8 b3 b: {
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
2 o* [* S( w# a- w, k* E) D; o" `; f( [access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade- U% o" w7 ~6 h8 C
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are/ _. j3 Z% s P. W( U
positive for the year-do-date, including high yield.1 ]5 f3 p4 t: r C8 A
 Mortgages – There is no funding for new construction, but existing quality properties are having no trouble+ @( M# t: D' t% P, P4 }9 I" u
finding financing.3 H. S: p5 _, d: j. E& |, J" M- Z
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they; U: v- ? {& f# a
were subsequently repriced and placed. In the fall, there will be more deals.
% [0 v$ A6 T$ ? Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and* H e3 B; C5 A/ p4 O
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
) \8 B% S- l) ?, {* Fgoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for& Q% M4 k% R+ h& Y7 G% ?
bankruptcy, they already have debt financing in place.
- B# m* p i. K8 F9 O European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain; H# x1 W9 }0 D3 @+ g
today.
2 S# J7 B* c* K5 h' Z0 X6 K9 ] Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
8 x* C5 {, }- o! F7 a' aemerging markets have no problem with funding. |
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