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发表于 2011-9-17 13:16
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Current situation
" ^% r/ N9 G4 P% P The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long0 r+ s- t0 h0 S2 B6 A
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may$ z& U3 O4 j! d
impose liquidation values.
1 f) L( ?* }& d- S$ o! T' R In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In5 F0 b8 B8 a6 [
August, we said a credit shutdown was unlikely – we continue to hold that view.
1 a" F, i1 n% T' Q7 a$ r! M8 V The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
4 b9 ~5 B5 A2 |! y0 I0 Yscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.5 c& s3 w! O' T8 V, _) c
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A look at credit markets
) ~7 [' j7 p2 S1 H0 L Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
- h6 S0 O5 T0 z( eSeptember. Non-financial investment grade is the new safe haven.
* p: x: b! _# S* _, v1 N High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%% q% B6 \+ j: k( U; m, ^
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
) s0 x- _( {- ~/ T+ Ybillion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have" Z6 X! g# l- ]/ e3 a/ `' K
access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade5 o P( p+ Y' X
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
/ f8 F; x S0 Q5 }; H9 u; i; r0 Qpositive for the year-do-date, including high yield.
5 e7 V6 ]7 R- P) u4 l Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
+ V! V& n7 p! afinding financing.2 M/ G3 y4 P7 {/ [; n$ f" E( B* ?
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they' e5 t" b$ `1 e9 k. a1 a9 x* j7 g
were subsequently repriced and placed. In the fall, there will be more deals.$ a' M7 j% t5 X8 w
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and% X+ q2 \3 g) {4 [2 G. Q, r5 V
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were W( ~- V: M: q! W) I
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for1 i/ r/ L: w- M" m1 g, S
bankruptcy, they already have debt financing in place.
u$ p* l' J! t1 q/ y European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
F' d& t. x$ h5 N# k7 Gtoday.7 ]: `6 E0 ]! P0 J' y
 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
, t) } j/ c( bemerging markets have no problem with funding. |
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