An unexpected rise in junk bond yields has led to a sharp fall in prices, and experts think the worst is yet to come. Note that the junk bond market is operating from a more pessimistic outlook than the equity market. This divergence is not uncommon. From Bloomberg: High-yield, high-risk bonds are off to their […]
Read more...Well. at least we have a new addition to the finance scene that isn’t an acronym. A zombie deal is what happens when a LBO transaction with a cov-lite loan goes bad. Recall that “cov-lite” was a sign of how frothy lending conditions had gotten. Just think, a mere year ago, a private equity firm […]
Read more...Saying bad things about rating agencies may seem like beating a dead horse, except this horse is still very much alive. Even though by some measures Fitch has comported itself better than Moody’s and S&P (it downgraded Ambac to AA and was early to point out excesses in commercial real estate lending), it has shown […]
Read more...Gillian Tett has an intriguing little piece in today’s Financial Times, in which she reports on the first public valuation of particular structured credit instruments. The odd bit (and theories by those that may have insight are welcome) is that JP Morgan apparently elected to make these prices public. JPM needed to value the securities […]
Read more...The comments in the Financial Times by Yoshimi Watanabe, Japan’s financial services minister, are extraordinary. He ventured to give the US advice on its credit crunch based on Japan’s experience during its post-bubble-years banking crisis. And it’s not pretty. Why are these remarks so unusual? Consider: Most countries don’t give other countries advice on how […]
Read more...If you read between the lines of the Financial Times story that served as a point of departure for a post earlier this evening (“Desperate Central Bankers to Bail Out MBS Market?“) it was clear that the Bank of England was the most keen to shore up the wobbly mortgage securities market. This New York […]
Read more...Today’s Bloomberg provides yet another example of how the credit crisis is producing behavior well outside historical norms. We had noted, courtesy Alea, that fails in the repo market had reached “massive” levels. The explanation? A lot of Treasuries are now held by investors who aren’t willing to lend them (this is often due to […]
Read more...A professional investor alerted me to a not-widely-noted element of the Fed’s new discount window clone for primary dealers, the so-called Primary Dealers’ Credit Facility (I am going to lose track of the acronyms given the speed with which the Fed is coming up with new ways to socialize losses). This overview is from the […]
Read more...A colleague I’ve cited occasionally who has extensive contacts at the Treasury and pretty good ones at the Fed has been muttering for some time that European banks are in every bit as bad shape as US banks and he has been waiting for that shoe to drop. He also sees that as intermediate good […]
Read more...A bit of good news on the generally gloomy credit markets front: banks have managed to unload some of the LBO loans they have held on their balance sheets. Admittedly, however, they still have great deal more to place, nearly $130 billion of buyout debt. However, they have had to offer large discounts. Recent reports […]
Read more...People never learn, as John Dizard reminds us via “Forget the past and you make the same mistakes again” in the Financial Times. Quite a few policy makers have talked up plans to use Fannie Mae and Freddie Mac as central agents in salvaging the US housing market, typically by refinancing stressed borrowers. The markets […]
Read more...Mohamed El-Erian, former head of Harvard Management Company, now co-head of the biggest bond investment firm, Pimco, has been a reliable source of insight into the operations of financial markets and the implications of policy measures. Well, at least until today. In a comment in the Financial Times that shows him to be wearing an […]
Read more...Two readers wrote to me concerning phenomena we’ve mentioned upon occasion in the expanding credit crunch, and it seemed a good opportunity to discuss them longer form. There are two separate, but related threads: we are now seeing a lot of “every man for himself” behavior (liquidity hoarding is one of many examples) that seem […]
Read more...This is priceless. Being an objectivist means never having to take responsibility for your actions. Greenspan has now decided to pin the financial market crisis on models. Gee, it was your Fed, Mr. Greenspan, that endorsed letting regulated entities decide how to mark and manage their derivative and structured product risks without anyone at the […]
Read more...The Wall Street Journal reports that JP Morgan is trying to solidify a deal for Bear before the Asian markets open: Terms of the deal were still being hammered out Sunday afternoon. Reflecting the dire situation at Bear, the company is likely to fetch considerably less on a per-share basis than its stock price of […]
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