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发表于 2011-9-17 13:16
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Current situation
! D1 ]* `0 V6 e3 Y( z The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long0 l8 _8 s- h4 B3 S
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may- c/ S1 H) U: j0 C) F" I
impose liquidation values.
5 P/ @* m* q+ l; |# j In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
; g# ]# p( V8 z: p) J3 A0 F6 H; h5 rAugust, we said a credit shutdown was unlikely – we continue to hold that view.- u- W) L& q2 z, Z* ~
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension% t8 ^ V2 q x- Q& ]
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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A look at credit markets
: v; q4 m. |% T+ t+ {" a. d Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
# F& w( `: l2 G1 b2 C0 pSeptember. Non-financial investment grade is the new safe haven.4 R' T; k, [; J
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%
x7 V9 o+ U. x: I! ]& Qthen, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
% i' _5 {7 Z: g6 z! tbillion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have# d) |3 u4 v$ `
access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade% ?; z. ^( |* U$ o# r
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are O$ h, N9 G% }
positive for the year-do-date, including high yield.
+ i+ h: e' ^4 p" j/ z+ ]! e! x Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
7 W0 W; b* `( A* H2 \finding financing.
, |+ y1 R# }& x8 U9 p* F' A) ` Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
) m3 Q5 L" O: ^3 b+ u, a7 q8 `were subsequently repriced and placed. In the fall, there will be more deals.$ Z' W' \4 T3 T& R5 ]% L# T
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and+ T1 J* m4 Y' }/ w; v
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
$ p5 U. {; A; b) v0 vgoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
4 t2 U V i1 mbankruptcy, they already have debt financing in place. G$ j0 @/ l1 M; m1 l
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain! Q7 }' F+ }9 u
today.
/ ?" W9 H: h c+ g Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in7 m* ^* o3 A" @3 X
emerging markets have no problem with funding. |
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