One of the big news items yesterday was the turmoil in the auction-rate securities market, a $330 billion corner of the muni market, which is a direct casualty of the distress with the bond insurers. The specter of Bristol Myers taking a $275 million charge on an $811 million, announced at the end of January, […]
Read more...UBS announced fourth quarter results of a loss of 12.5 billion Sfr, which was in line with its January 30 preliminary estimate. The most interesting item was the breakdown of its $13.7 billion writedown. From Bloomberg: UBS’s writedowns included $10.8 billion on subprime residential mortgages, $2 billion on so-called Alt-A mortgages, which fall between subprime […]
Read more...A Bloomberg story discusses that the Fed will have to lower rates further, despite January retail sales figures that came in better than expected, because lower short-term rates have not led to better terms for borrowers. The story (and perhaps even the Fed) seems to miss why lenders are demanding higher rates: the securitization mechanism […]
Read more...A story on Bloomberg highlights the seize up in the muni bond auction market, which is forcing issuers to pay as much as 20% in interest to roll short-term debt. The bonds are auctioned every seven, 28 or 35 days. If the auctions don’t attract enough bidders, the municipalities must pay rates specified in their […]
Read more...A MarketWatch story on Warren Buffet’s borderline extortionate offer to struggling monoline insurers suggested it could provide a format for a rescue New York insurance superintendent Eric Dinallo. A story by the New York Times alluded to the same notion. While I may be missing something, I don’t see how this could possibly work. First, […]
Read more...We’re going to be a bit brief this evening. The Financial Times has a useful item in its Lex column which explains why leveraged loans, despite their seemingly rich pricing, are going begging: It has been a terrible period for leveraged loan prices – worse than for high-yield bonds despite the unsecured nature of the […]
Read more...We are late to the big news du jour, namely Warren Buffett’s proposal to rescue the muni bond business of MBIA and Ambac. The market staged a peppy rally on the announcement, no doubt due to a resumption of bullish optimism and a lack of understanding of the implications of the deal (the brush-off of […]
Read more...The Financial Times has an interesting piece today by Chris Giles and Gillian Tett, “Lessons of the credit crunch.” The world’s top central bankers have learned that their traditional policy tools haven’t worked as well as they would have liked. So how to judge the job they have done? The FT story fails to address […]
Read more...We had commented before on the fact that Spanish banks have been going to the ECB for funding because their domestic mortgage securitization market is virtually shut. In December, Spanish banks borrowed €44 billion, more than double the average of the previous 15 months. The Financial Times story notes two troubling elements: first, that the […]
Read more...A front-page Wall Street Journal story picks up on an alarm sounded over the weekend by the Financial Times, namely, that the leveraged loan market (the paper used to fund LBO deals) is in serious trouble. Investment banks are sitting on sizable unsold inventories that are declining in value, thus sure to lead to further […]
Read more...The G7 forecast that subprime damage could total $400 billion is hardly surprising to anyone who has been following that sorryhttp://www2.blogger.com/img/gl.link.gif saga. Predictions that were once regarded as wildly pessimistic have been borne out as correct. What is noteworthy about the G7 remarks is that things have gotten so bad that there is nothing to […]
Read more...Today’s Telegraph has a good piece, “Japan is the next sub-prime flashpoint,” by Ambrose Evans-Pritchard. And before I get to the piece, I want to say a few things about the author. A number of readers detest Evans-Pritchard, and I am at a loss to understand why. He wears his biggest fault on his sleeve, […]
Read more...Don’t ask how I missed this story,, “Debt fears heighten in US and Europe,” in my early a.m. survey of the Financial Times; it’s the lead page one item in the print edition. As far as I can tell, the underlying news story, the dumping of leveraged loans at distressed prices, has not been picked […]
Read more...The Wall Street Journal and Bloomberg report that the SEC is mulling regulations for rating agencies. Note that rating agencies have benefited from being a protected class, since the SEC determines who can be a Nationally Recognized Statistical Ratings Organization, yet heretofore has imposed no obligations on them. In the 1970s, the SEC set regulatory […]
Read more...Bloomberg reports that Bear Stearns increased its short subprime position from $600 million in November to $1 billion. The story suggests that this hedge is to offset trading positions; there is no indication that the firm is “net short” as Goldman is. For those who might think there is something wrong with this strategy, consider: […]
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