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发表于 2011-9-17 13:16
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Current situation
, O" `% L( H1 g The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long
8 O7 q! n1 p) Bas funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may+ {+ I6 v; q4 g+ F
impose liquidation values.
& j- c! Q' B1 b( ]1 n0 Z In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In
: q5 g! T) L* f( n6 FAugust, we said a credit shutdown was unlikely – we continue to hold that view.
. c" P9 \9 o! m. L$ E2 } The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension1 K" J4 \* @; g2 s8 ], |9 }
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.& B4 P4 E K$ |# m+ ~3 v
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A look at credit markets
2 z$ A- G/ n/ Q( | Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
9 M; i6 F! c* s0 x1 v# T1 p+ R* ]September. Non-financial investment grade is the new safe haven. B. ^' G# S8 S, a' j
 High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%, Q/ w( G# D/ Z. Z5 P6 d
then, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $1; I3 V9 L2 O2 v% D. X9 Z
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
3 ]) j$ d( W0 \* R, ^access to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade
0 ~, m' Y. e9 g" m, N& BCCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
8 j+ |, G3 B" {0 v4 lpositive for the year-do-date, including high yield.
" D5 E, X0 y: h! k Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
4 i2 e% l( D7 qfinding financing.1 W( B# ]. V" H1 D0 w2 O; [1 X
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
/ E9 b. c" c2 k5 Y* a- {were subsequently repriced and placed. In the fall, there will be more deals.
# N/ A; c7 ?1 g& s4 H Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and0 ^% j% m, W7 C
is now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were$ [ H2 ]* c! }* f1 p1 J
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for+ @* v( T/ f9 N2 W/ l# c
bankruptcy, they already have debt financing in place.3 Y% i5 V6 N$ V. _* ]8 G
 European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain8 y2 K! E0 i. g `1 ^
today.. I* P/ S2 A' E0 P$ E
 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in/ D( x6 I' Z# n& u2 k3 U
emerging markets have no problem with funding. |
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