Yields on 10YR US Treasuries were cut 51 basis points from 3.02% to 2.51% in the minutes following the announcement on Weds. But rates crawled back up on both Thurs (+10 basis points) and Fri (+5 basis points) leaving the market just 36 basis points lower than before.

The improvement in corporate and mortgage rates has been even smaller as credit spreads have flared out to offset some of the drop in benchmark rates.

Yields on corporate debt from seasoned AAA-rated issuers fell just 24 points after the Fed announcement (half the reduction in benchmark rates) and had already trickled up +4 basis points the day after.

Yields on BAA-rated corporate debt fell only 23 points and were already up 6 points the following session.

Most investors have concluded that the Fed’s gambit is a bluff. Buying back $300 billion worth of government debt is not enough to make a sustainable difference (especially when the government will be issuing hundreds of billions more securities of the same tenor at the same time).

The only way to make a significant impact would be to buy much more — and absorb a significant proportion of the government’s new issuance.

But if the Fed expands the buying programme, it will be monetising a large part of the government’s current borrowing needs and engaging in old fashioned inflationary finance. The resulting hit to both its credibility as well as confidence in the debt market and the value of the currency would only make the crisis worse.

So the Fed is trapped. The current buy back programme is too small to have more than a symbolic effect. But if the programme is expanded, fears about inflation-financing will trigger the rise in bond yields and collapse in confidence and the currency the Fed is desperate to avoid.

Suggestions:

Chinese agencies are also said to be buying physical metal directly from miners.
The move is to protect local Chinese smelters and miners as well as to rebuild strategic physical stocks

M&A activity in the mining space is likely to jump significantly if Chinese entities move to grab mines, projects and prospects around the world as part of a strategic move to secure future metals supplies.

Credit Suisse comment: We do not think the comparison between APS costs and Barclays’ early 1990′s charges is overly relevant. After all, certain parts of Barclays’ portfolio lost much more than 2.5% in 1992 (e.g. commercial property at about 7%). Furthermore, it ignores the benefit of lower risk weighted assets. From our perspective, we hope management seriously considers APS, not least for its toxic structured assets and in particular monoline exposures. While the bank clearly feels strongly about the quality of these – it highlighted that its CLO positions were strongly cashflow generative and far more diversified that other “toxic” structured assets – we can’t see the market giving them the benefit of the doubt in the near-term.

Credit Suisse comment: We view positively that Barclays’ recognises the benefits of a higher equity tier 1 ratio. Not least, at 6.4% it is 3% lower than LBG and RBS. While we don’t think Barclays needs as much capital as these two banks – as management says, large parts of their loans books are likely to perform a lot better – we feel around £8bn of additional equity capital would be helpful. This would take the ratio to over 8% ex APS or over 7% with an APS of £80bn @ 6% fee (our central case assumption). iShares is clearly a key focus for boosting capital and the Sunday Times says that Hellman & Friedman are leading a consortium that could offer around £3.5bn (higher than many analysts have suggested) with The Guardian saying a deal could be announced as early as this week. A sale of iShares would still leave a shortfall versus our £8bn capital calculation, but Barclays has had a good start to the year, particularly the first two weeks of January – not least due to strong flow and margins in Barclays Capital – and continued strength could assist the capital base further. In addition, management did not rule out Government B shares. They are obviously keen to avoid Government involvement but it sounds like any decision will depend on associated terms and conditions. They highlighted that 2x their share price on 25th February (the commonly referred to “undisturbed price”) was around 200p and this would avoid issues around the anti-dilution clause on the MCN.

See end of email for analyst certification and important disclosures, including investment banking relationships. J.P. Morgan Cazenove Limited does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

We See No Reason Why 2009 Will Be Different — This pattern is driven in part
by the weighting of revenues to the 4Q, and by the reaction of consensus to
newsflow: a miss vs. budgets in 1Q-3Q translates immediately to a downgrade,
while over-delivery is often ‘held in reserve’ until the 4Q. We see no reason why
in 2009E, with the prospect of a weak 1H, this asymmetry won’t sustain.

Good News: We See a Potential Option Strategy — For LT holders a potential
way of monetizing the anticipated seasonality is by selling June Calls (currently
priced 16p at a 440p strike). This increases the effective yield (by 4%) while
maintaining upside exposure to our new PT of 440p

Note: The Signet Global Fixed Income Funds’ performance remains
positive and the amount for Signet Global Fixed Income Strategies
Limited the revised estimate for February is +0.52%.

Notwithstanding these writedowns we will be working closely with the
liquidator, PwC, and intend to explore other avenues, in order to
see what amounts, if any, are recoverable, directly or indirectly,
on behalf of our investors.

Any further information, of a material nature, will be provided to
shareholders once available.

Signet Capital Management Limited
Buchanan House,

This puts the shares on a March 09 PER of 4.5x, and an EV/EBITDA of 3.9x. The shares are currently yielding over 12%, and at 2.3x net debt / EBITDA whilst there is some debt, it doesn’t seem to be much cause for concern. The shares are currently trading at a 20% discount to the mid-cap food space, which seems unwarranted given that it’s got a diverse range of products, some of its products are branded (i.e. Goodfella.s pizza) and it isn’t over exposed to any one retailer. At these prices, the valuation looks to us very cheap. A trigger for rerating would be market
taking comfort from Thursday.s trading update