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发表于 2011-9-17 13:16
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Current situation
# Y$ [' k# ~# I The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long
% m; w! W& E& cas funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may* b4 x4 N4 w# I
impose liquidation values.
9 Q. q5 S( J* H2 K" r) F In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
$ D/ R: ^+ \( H* ?/ O+ MAugust, we said a credit shutdown was unlikely – we continue to hold that view.* L$ N, m6 ]. ^: o6 A
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension+ t4 _1 L& e8 e4 R* l" s
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.* r- x7 Z) J- m5 Z
6 P$ Q( w: {8 T" r( hA look at credit markets
; o4 @3 e) V* z* J Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
I. }) s: b/ P, e2 H5 B: xSeptember. Non-financial investment grade is the new safe haven.; J4 u# w. T) V6 |. G- A; e
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%
2 e( e0 z3 X6 T/ d* tthen, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $19 @: A! E& Q: H
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
" ]% V1 g7 s" e4 M! V7 Uaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade
3 B, c; E* s, A4 Z! s+ nCCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
: h5 A6 n' c! i+ w; E5 Lpositive for the year-do-date, including high yield.
1 [* @, g9 E9 F) V8 U# N% U* d Mortgages – There is no funding for new construction, but existing quality properties are having no trouble5 T! `" S) Q8 P3 a8 F
finding financing.
! T8 O, T; n5 {% i7 s2 i Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they' r1 y* ?' d7 f3 a& _
were subsequently repriced and placed. In the fall, there will be more deals.
; |5 k3 M: S2 U5 z$ p Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
4 v% ~. u4 c/ lis now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
7 H' N; J! c1 r# A7 T0 {, vgoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
O* d/ z: Z* i4 H: Pbankruptcy, they already have debt financing in place.
2 f2 W# T, R ~/ W4 ?: m7 T European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain. v4 m6 C' P# k7 w% v8 w
today.
4 g% i; X: B4 X Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
* u$ p% T5 X- B5 b+ w$ eemerging markets have no problem with funding. |
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