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发表于 2011-9-17 13:16
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Current situation
; O7 i9 u& }; Z6 K! L$ A2 r The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long( l. i% v' n$ Y# r* X
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may! C8 D' L" v( s3 M" m0 R0 B/ e
impose liquidation values.
' H) |( q+ Y% n+ Q: h K$ _ In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
6 `( g3 f# ]* |August, we said a credit shutdown was unlikely – we continue to hold that view.
* x6 d! W7 B2 E# P2 m0 v+ q2 y2 | The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension
. W, U/ k) x! i" p/ Escrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.7 Q6 |( J8 d& i; S
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A look at credit markets
3 O6 _# c! n7 n. L4 I$ L; G! b Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
1 j# c& D- w# p; P' v8 P1 ~September. Non-financial investment grade is the new safe haven.9 ?; p6 g; z4 M& P8 {/ w
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%
% ?' a1 j& l7 |& h* ]% f. \then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1
2 V: A" x. N. {billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
* a& i. A6 O4 m: N/ P$ Oaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade& |% w' k4 o' v2 D; H/ }
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
- D" B& q1 ]& @positive for the year-do-date, including high yield.7 w- F$ T! q6 Z9 d
 Mortgages – There is no funding for new construction, but existing quality properties are having no trouble4 x- c2 o. C4 w6 C
finding financing.# H0 t3 x# x# [( \7 u( a+ t B' Y
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
) x2 M; Q+ b) D6 [: W$ Mwere subsequently repriced and placed. In the fall, there will be more deals.: \7 e- @. M4 }1 L1 j* R5 W! p
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and7 z8 m3 _. J6 o" k
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were0 Z% B5 N" _. q; k
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for; B+ q0 Q a4 v( M7 Z
bankruptcy, they already have debt financing in place.
9 B& y( P) Z8 ^: M; e! d0 V European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain) c. k; i; J. H. U) r( q* a
today.
$ u& @2 _6 w" S7 ]6 N: v" } Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in/ _1 k* f/ I! C: P! g, Z R3 w! @
emerging markets have no problem with funding. |
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