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发表于 2011-9-17 13:16
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Current situation
& T: T: N$ ]/ Q V% E! \/ p! C+ V The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long
* K, A( O% w) H$ q# a" M0 Mas funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may
, b+ a/ P2 {5 S; ^# ~6 yimpose liquidation values.9 ]7 b2 J7 p0 ]% j) y
 In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In/ }( N+ r7 u9 }
August, we said a credit shutdown was unlikely – we continue to hold that view.( p( v X/ s/ |3 ]! T6 z, Q% v
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
* ` B& h; D4 p) O3 Wscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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( u* i# V7 S2 K- J7 ?A look at credit markets* R3 T/ d" [8 O9 f5 D# K
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in" m% h# |1 a' T) {/ p' t# ~
September. Non-financial investment grade is the new safe haven.
4 Q, |7 C3 t: P6 x High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%
: ~& k" f. |: O$ h7 ithen, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
; q8 ], X& }9 f9 q, y8 Ibillion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
) ]; y& Q- X$ k' u9 vaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade4 Y8 Y- B5 i6 c
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are& }- R4 u5 V! }- Y6 J
positive for the year-do-date, including high yield.
3 }, T+ c/ n+ s$ z Mortgages – There is no funding for new construction, but existing quality properties are having no trouble; V8 {# J1 l- Z! {. t0 t$ H+ g
finding financing.
; f! S+ s8 J- A Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
4 l. ^: V$ D7 L0 vwere subsequently repriced and placed. In the fall, there will be more deals.6 I7 I$ j: P! c4 U' p4 S
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
* T, G- c8 u" @is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were8 Z' X0 Z F1 G: I) \! K/ H) B
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for1 y9 J. z# F" V- ^
bankruptcy, they already have debt financing in place.0 \% M0 D B( E9 `
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
% T6 W# i0 a8 ^! f% Q$ ntoday.
) u$ B! W8 c5 a( {# T- S4 L7 e Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
! @ f* ]: S9 _, m! eemerging markets have no problem with funding. |
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