Category Archives: bonds and loans

Is There Still a Premium for Triple-A Debt?

One of the themes running through Roger Lowenstein’s NYT magazine magnum opus on the ratings agencies is the idea that debt becomes more valuable when you slap a rating on it, and that the higher the rating, the greater the … Continue reading

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How to Make Fake Profits in the CDO Game

Gillian Tett has a good column on the super-senior game, in which she chastises banks for losing sums "larger than the gross domestic product of many countries" by entering into "a humongous, misplaced bet on a carry trade that was … Continue reading

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Deconstructing Libor

Henri, in my comments yesterday, has a smart way of looking at the TED spread. The TED spread between Treasuries and Libor, he says, is the sum of two other spreads: the Treasuries-OIS spread plus the OIS-Libor spread. OIS stands … Continue reading

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The TED Spread and the Flight to Liquidity

Paul Krugman tries today to explain why he’s so obsessed by the spread between Treasuries and Libor: I got to ask Fed officials about [it], and was told that they preferred the OIS spread, based on Fed funds futures prices. … Continue reading

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The Latest Victim of the Credit Crunch: Libor

Carrick Mollenkamp has a worrying piece in the WSJ today about Libor in general, and the much-benchmarked three-month Libor fixing in particular. Jitters have made many banks unwilling to extend loans to each other for more than one week. As … Continue reading

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Spinning Deutsche’s Loan Sale

I’m having something of a Rashomon moment with respect to Deutsche Bank’s sale of leveraged loans. Dana Cimilluca and Peter Lattman, in the WSJ, say that the mooted sale by Deutsche Bank "could bolster its own health as well as … Continue reading

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The Problem With Private Equity Buying Leveraged Loans

Remember how those private-equity companies are buying back a bunch of their own debt at 90 cents on the dollar? Well, if it’s literally their own debt, rather than simply a bunch of leveraged loans in general, then Equity Private … Continue reading

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Attractive Lenders

If I were a chartist, which I’m not, I’m sure I would consider the chart of KKR Financial to be surpassingly ugly. But I had lunch today with Brian McMahon, the CEO and CIO of Thornburg Investment Management, and he’s … Continue reading

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Where Private Equity Meets Public Debt

Back in October, things were so much smaller. The idea then was that KKR would put up $2 billion of equity, leverage it up to a total of $10 billion by borrowing $8 billion from Citigroup, and then use the … Continue reading

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The Plunging Schwab Bond Funds

As you might have heard, the largest bond fund at Charles Schwab, YieldPlus, is plunging in price. Suffering from massive redemptions, of the vast majority of its assets, it was forced to sell illiquid mortgage-backed securities at distressed fire-sale prices. … Continue reading

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Are Investment Banks Really Trying to Fix the Auction-Rate Market?

The WSJ reports on the market in auction-rate securities today: Last week, UBS said it was marking down an undisclosed amount of the value of auction-rate securities held by its customers. Other banks, including Merrill, aren’t marking down their values. … Continue reading

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Buying Bonds in the Expectation of Technical Default

I’m at the Harvard Club today, for a Debtwire conference on distressed debt. The editor of Debtwire, Matt Wirz, just mentioned something very interesting, which he says he’s never seen before: traders and speculators are deciding to buy leveraged loans … Continue reading

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Chart of the Day: Credit-Equity Divergence

Helen Thomas finds this chart in a report from Bank of America: Basically, the x-axis is stock prices while the y-axis is bond spreads. The red dots are What Was: they’re weekly datapoints from June 2002 to June 2007. The … Continue reading

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Lehman: Still Ready to Lend Megabucks

I’m back from holiday, and it seems there’s a 218-page report I Really Ought To Read. Do I hafta? In the meantime, I note that Lehman’s hitting the markets up for cash. Obviously Lehman, like all investment banks, reckons that … Continue reading

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Credit: Still Hairy

The TED spread is above 200bp, and now repo rates on three-month Treasury bills have gone negative. What does that mean in English? Markets are broken. And once markets break, the healing process tends to be long and painful. The … Continue reading

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When a Curve Steepener Loses $800 Million

In exceptional times such as these, I can understand how highly leveraged credit funds with a large risk appetite could end up losing a lot of money. But this is ridiculous: A $3bn London hedge fund lost more than a … Continue reading

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Whither the Discount Window Stigma?

The WSJ headline today implies great dilemmas on Wall Street. "Firms Wrestle With Loans’ Stigma", it says, explaining: Wall Street firms were reluctant to borrow from the program Monday out of concern it could be seen as a sign of … Continue reading

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Explaining the Bear Stearns Share Price

If you head over here, David Neubert has a slightly cryptic explanation of why Bear Stearns shares are trading in the $7 range. After IMing with him, I think I’m clear on what he’s saying, so let me try to … Continue reading

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Good News on the Credit Front

Accrued Interest has some numbers on banks’ credit spreads, and the news seems to be bad, but manageable. Crucially, they’ve tightened in from the open, and are now only a little bit wider than they closed on Friday. Elsewhere in … Continue reading

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Lehman Thinks Bank Bonds are Cheap

Fixed-income analyst Ashish Shah of Lehman Brothers has put out a report this morning urging investors to buy bank debt. "The Fed has finally intervened with overwhelming force," he writes; the regulatory authorities now understand that the time for half-measures … Continue reading

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Credit Markets: Very Cautious

John Jansen is of course the place to go for updates on the credit markets, and something very interesting seems to be happening right now, which is that nothing very interesting seems to be happening right now. Says Jansen: Many … Continue reading

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The Fed Needs Credit Confidence to Return. Today.

Today could be the single most important day in the history of this credit crunch. Up until now, every major Fed announcement has resulted in a market pop, at least for one day. If in the wake of $30 billion … Continue reading

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The Repo Market Crunch

Not very long ago, when the market in Fannie and Freddie debt went pear-shaped, I tried to look on the bright side, saying that at this point we’d pretty much run out of formerly-liquid securities which have now gotten credit-crunched: … Continue reading

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Carlyle Deserved to Collapse

Should Carlyle Capital be aggrieved that its lenders are seizing its assets? There is a case to be made – and it’s made quite well by Robert Peston – that this is all the fault of the Fed and its … Continue reading

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Moody’s to Rerate Munis

Laura Levenstein of Moody’s says that she’s going to start rating munis on the same scale as corporates. Alistair Barr reports: "Moody’s recognizes that the municipal bond market has evolved, and with it we have taken steps to respond to … Continue reading

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