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: […]
Read more...While one data point does not constitute a trend, a first page article in today’s New York Times, “Creators of Credit Crisis Revel in Las Vegas,” may signal a shift in popular sentiment. Normally, “how the mighty are fallen” stories are exercises in shadenfreude. But this one, on the annual convention of the American Securitization […]
Read more...Bill Gross, founder of bond investing giant Pimco, has almost no kind words for the bond insurance industry in a comment in the Financial Times, “Rescuing monolines is not a long-term solution.” He views a salvage operation for the industry as at best a stopgap to prevent a crisis in the so-called shadow banking system. […]
Read more...Deutsche Bank’s CEO Josef Ackermann issued a stark warning today: bond insurer downgrades would have catastrophic consequences, on par with the subprime crisis. Note tha this view is in contrast with teh comparatively sanguine readings that have been coming from some US analysts and the US media, which now appears to regard teh increasing possibility […]
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