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发表于 2011-9-17 13:16
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Current situation
0 ?5 J& y- G9 Q( S9 { The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long9 }7 ~' k) w. X( i2 J
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may" ?- h3 }: r$ ~, c# Z
impose liquidation values.
7 ^/ i: T2 J3 h In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In7 o9 `5 v. G9 `9 r
August, we said a credit shutdown was unlikely – we continue to hold that view.
2 l2 k& P9 v2 \ The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
/ ^ t0 e8 O, C9 h0 e) Fscrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.
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A look at credit markets
: M2 x# j+ S$ ~- g7 M& g Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in& h7 g& y# R. }( u: |; @" Q/ m" F
September. Non-financial investment grade is the new safe haven.
6 o. b0 j# v4 d( z High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%6 A) ?+ S) @: q0 |9 E( W% w
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
h, w: a; A6 o6 H/ L9 b! Dbillion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have9 G6 f6 D; S G8 _) h; L
access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade
: H9 C0 h x6 x8 E2 J8 ~CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
$ b0 ~+ {4 Z5 m3 Vpositive for the year-do-date, including high yield.
1 C7 T% y. w5 t# m" s Mortgages – There is no funding for new construction, but existing quality properties are having no trouble' [$ _8 f. `/ c
finding financing.7 r% K6 z# a" K
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
9 Q/ F8 Z s) zwere subsequently repriced and placed. In the fall, there will be more deals.
& A, n2 v, B! b4 ~: z" A# s Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and3 T. v8 [! I+ j* t% ]4 `/ c
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were
$ ~' O1 c, y, N3 b' a! Agoing up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
& e) N; m! X) l5 ?: V) rbankruptcy, they already have debt financing in place.7 O% H# e" b$ O" |4 o3 O
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
& Z- f/ J( p. f3 E8 ltoday.& i# d: [! b8 f
 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
7 `# G8 b6 F1 Eemerging markets have no problem with funding. |
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