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发表于 2011-9-17 13:16
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Current situation
: J+ j k9 D$ g$ ^ The lesson we learned from the 2008-2009 credit crunch is how credit markets affect stock valuations. As long( W6 [9 I5 y% @9 G f
as funding markets stay open, equities are valued as going concerns. But if credit markets close, markets may( n( x3 V. ]4 c( i2 Q, j
impose liquidation values.* x# {4 b: u& S/ m0 H4 t# a4 q" [- {
 In the summer, the European credit crisis caused another round of market worries about a credit shutdown. In, N+ m) D L E% I2 C2 ]+ b `2 S
August, we said a credit shutdown was unlikely – we continue to hold that view.: }3 K# w6 b# ?4 X
 The collapse of interest rates on 10-year Treasuries to 2% leaves banks, insurance companies and pension! {* M1 D5 |; P! ]' e
scrambling for higher yields to satisfy their obligations – this is supportive of corporate bond markets.: ~0 P( M- O( w! }/ K; d
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A look at credit markets/ a A8 X X5 X+ @
 Investment grade – $17 billion in new issues were placed last Wednesday. We’re expecting $80-$100 billion in
7 L4 B' a4 ~3 W" u ~3 QSeptember. Non-financial investment grade is the new safe haven.
, O1 H) s! s, H! w8 p6 z High yield – In March, the spread above governments was 450 basis points, today it’s 740 bps. Yields were 7%
" ?9 s v' b# a/ gthen, now they are 8.5%. New issuance has been about $30 billion a month, although August saw only $15 n) D- T# r- G0 `! @9 V9 J
billion. That said, the market is still open. Risk has been repriced – but appropriately priced issues still have
v8 e4 i' e- U0 R6 Aaccess to the market. There are only two parts of the global bond market having difficulty – ultra-low-grade+ t* C" K K, Q3 Y) o" p
CCC issues and European high yield, which are both down about 2.5% year-to-date. All other bond markets are
3 B4 p% G; }2 ^* M/ R& u7 Q$ F" u5 Wpositive for the year-do-date, including high yield.6 G5 z5 H% e2 ?% _
 Mortgages – There is no funding for new construction, but existing quality properties are having no trouble
4 V. J! ~* N F& ^& Yfinding financing.1 U. }+ ]' o8 S6 J" d5 z1 J
 Commercial mortgage-backed securities (CMBS) – In the summer, there were two failed transactions, but they
8 K- | y' y8 d5 Nwere subsequently repriced and placed. In the fall, there will be more deals.4 Z9 d; J+ p2 ?/ E4 [, B' `
 Leveraged floating rate collateralized loans – The index was trading at $90 last September, $96 in March and
; V; _7 h& O4 H4 Iis now back to $90. Changes were a result of interest rate expectations (people thought that interest rates were5 f% j9 N. M* ]' P9 l8 ~1 z& `
going up) rather than liquidity. Chapter 11 companies have no problem getting secured and when they file for
$ z: f8 v# e; K) R4 vbankruptcy, they already have debt financing in place.
- ^* n; ~2 J) h5 e% E+ T7 H4 Y European banks – European bank lending conditions are tighter. This is the weakest link in the financial chain
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 Emerging markets – Sovereign rates have rallied along with U.S. Treasuries. High-grade corporates in
9 y/ u* m3 O' U Z$ m3 E; P$ wemerging markets have no problem with funding. |
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