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发表于 2011-9-17 13:16
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Current situation
2 d" Y4 u$ e8 d The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long
3 F. F" m2 K$ \( w+ cas funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may; k9 _4 N+ {* M# H
impose liquidation values.
9 U. D' c! c' P9 j* ~8 v( W In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
& Z: `* C- U7 z7 D- N8 `# rAugust, we said a credit shutdown was unlikely – we continue to hold that view.
x( B. g- C$ y" r The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
- u: U& ^9 T5 ?- d- r# N# rscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.# A- A. p) j( M2 x
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A look at credit markets
+ d( R% F9 p- i6 c; r6 s Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in1 [1 b3 N8 R" p/ {
September. Non-financial investment grade is the new safe haven.
/ z1 i( g5 z G- l ? High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%8 {' c4 i7 X, |9 k) ^( Z
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1- m2 ~/ y" p* V4 ]7 g& ~( {
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
+ G" F; H& Y1 x+ C& c5 \8 Y( Iaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade
- z ?8 \! _+ qCCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
& n7 K& y) o$ Z) i' H8 npositive for the year-do-date, including high yield.
6 C$ f$ Y2 ^8 @ Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
: Q8 V, u% W7 `1 qfinding financing.
0 P; K. i( W" ]& I1 ` Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they/ V% H: b4 n4 I
were subsequently repriced and placed. In the fall, there will be more deals.
3 @+ g9 T4 e n1 L; a5 f5 T; q Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
: ?% s" q" w0 b) ~( g* P" J- Nis now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
: i6 \" K- Q! e) G# Hgoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for/ b! s$ z3 D3 ~8 M( x4 e# x. m
bankruptcy, they already have debt financing in place.
. d, `* \1 K4 Z5 p( g European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
4 V' M0 q0 }% E' Q; I% Atoday.
6 K7 n7 X# _- Q Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in, p$ {/ s+ E9 d$ T6 \- w5 ?
emerging markets have no problem with funding. |
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