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发表于 2011-9-17 13:16
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Current situation
& n/ [+ L Z F7 r7 @: ]" T* H The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long9 q) x$ X7 }* L x% K% S
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may7 U" p0 }8 A0 D- ^& x
impose liquidation values.
1 |- q+ ?' S# ? In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In3 K! W% f1 U- F! f/ g
August, we said a credit shutdown was unlikely – we continue to hold that view.4 O6 u8 r- ~+ K9 D) x; [
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension' C9 m# v: A0 l# T7 S
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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$ O3 ]$ b2 f) T$ QA look at credit markets
5 Z1 u" V7 w, v$ e& I1 K Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in7 c5 {4 o4 G0 J/ x
September. Non-financial investment grade is the new safe haven.
1 P6 ]4 a* z0 ~; \; a High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%0 }) C! L' x4 w1 r
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1( K6 D$ k+ M3 H4 \; r9 Z; X9 W
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have- `( Z. P7 t" U% T9 s
access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade! z6 U# g3 g+ |7 |
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are8 { ]0 S3 V5 t3 k3 U2 m
positive for the year-do-date, including high yield.
8 ?8 Q: p/ p& M1 A) Z0 i Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
, k* G. V$ C2 \ K6 n. afinding financing.
* z- n9 h6 {; C" V& ?% m Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
; z9 e4 H! q7 e; cwere subsequently repriced and placed. In the fall, there will be more deals.
1 |/ h/ M `) b7 v5 u# @7 f Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and8 {+ E1 C) w2 i8 Y* L, Z
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were+ \; {- D8 i0 T* x( E7 h D8 \
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
3 r0 C$ p2 w, i% O" R! @# Hbankruptcy, they already have debt financing in place.
) ^2 B9 I/ U% d( C2 K/ `. i* ] European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain8 ?- R! V1 [! S4 u: Z
today.
M, W8 W; z/ j6 r C4 `7 W4 Y) g7 L# W Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
. l; g7 }/ j: N% a& H" D& @emerging markets have no problem with funding. |
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