Calculated Risk pointed us to a story in the Chicago Tribune, “Price slide nationally hides big gains in some metro areas,” which cites the Federal Housing Finance Board survey of 32 metropolitan areas. The report, which the article notes tends to produce more flattering results than some other analyses, found that, averaging new and resale […]
Read more...CFO.com, in “S&P Junks Investment-grade Ratings,” tells us that that ratings agency is of the view that investment grade borrowers aren’t getting enough of a cost advantage for it to be worth it to them to keep a good bond rating: “Borrowers have taken advantage of the cheap money by increasing leverage to finance dividend […]
Read more...Thanks to Felix Salmon for pointing this tidbit out to us. Due to leveraged buyouts (notice how the press has started to use that 1980s term once again?), there has been a surge in junk issuance. But since below-investment-grade issuers pay only about 180 basis points more than investment grade issuers, there is virtually no […]
Read more...From “Mortgage Brokers: Friends or Foes?” in the Wall Street Journal: The National Association of Mortgage Brokers, the main nationwide trade group for brokers, argues that brokers work neither for consumers nor for lenders. Aha. If the mortgage broker worked for the borrower, they’d have to make sure he got the best deal. If they […]
Read more...We have Mark Thoma to thank for pointing out this story on research by Nancy Wallace at the Haas School (UC Berkeley). She found serious deficiencies in the risk models used by banks to evaluate residential mortgages and predicted widespread problems a year before the subprime meltdown. She and her colleagues have just completed a […]
Read more...As I have mentioned before, this blog relies a bit more than I’d like on the Financial Times because its writers have a greater understanding of the inner workings of the financial markets and take a jaundiced view of recent developments. One has to wonder if the two traits are linked: if you have a […]
Read more...Unlike its US counterparts, the Financial Times has consistently been on top of the various unsavory elements of the credit market bubble: the near disappearance of risk premia, the growth of leverage on leverage, the lack of investor sophistication. A piece by John Plender does a very good job of connecting some of the dots […]
Read more...Until recently, the stock and bond markets have both signaled a great deal of optimism about the economy. But bond yields have started to creep up, which says that fixed income investors are becoming wary. We’ve noted in several posts that inflation is running at a higher rate than the oft-cited CPI stats would lead […]
Read more...Although it’s the Dow’s new highs that get the headlines, the really speculative action is taking place in the debt markets. As we have discussed in past posts, lenders and bondholders have abandoned their customary caution and are accepting yields that many feel are inadequate for the risks involved, and are also waiving customary covenants, […]
Read more...Michael Panzner of Financial Armageddon provides a nice synopsis of the oft-unappreciated adverse consequences of securitization. One element that is not inherent but seems inevitable is that the profits in the transaction are front-loaded, taken more as fees and less as spreads over the cost of funding over the life of the transaction. As he […]
Read more...The question of systemic risk, that is, the possibility of a generalized failure of the financial system, such as a stock market crash, is something that regulators think about a great deal and quite deliberately discuss a good bit less, since fear becomes a driving element in any market panic. The reason for the heightened […]
Read more...Bernanke normally adopts a measured tone and, as befits someone whose words can move markets, takes great care not to dwell too heavily on bad news. So it was suprising to see him issue a fairly pointed statement on risks to the banking system. His remarks on the perils of private equity loans, when taken […]
Read more...The headline above isn’t news per se, but someone reputable, in this case, Matt Fellowes and Mia Mabanta, have done the sleuth work of putting together the data to dimension the problem. The report says that the bottom quintile is “awash” with credit and now is one of the fastest growing segments. Ee found this […]
Read more...Fed Chairman Ben Bernanke has made an effort to be more transparent than his prececessor Alan Greenspan, but even Bernanke can be improved by translation. From Calculated Risk: Remarks by Fed Chairman Ben Bernanke: The Subprime Mortgage Market The recent sharp increases in subprime mortgage loan delinquencies and in the number of homes entering foreclosure […]
Read more...If a terrorist were to blow up Moodys, S&P, and Fitch, it would have a devastating impact on the financial markets. Rating agencies play a indispensable role in the debt arena. Many investors are required to consider bond ratings in their investment decision making process. Insurance companies, for example, are required to hold either all […]
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