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’Corporate bonds to the rescue?
Back in September, the FT reported an interesting estimate by JP Morgan.
Twenty-eight European banks would have faced a total liquidity shortfall of €493bn at the end of 2010, if they had been forced to meet new liquidity requirements (which actually come due in 2015) then and there.
Her Majesty’s SME CLOs?
It’s like putting your foot on the accelerator but because the transmission mechanism isn’t working properly, the car wheels don’t respond.
Actually George, that might be because the car is on fire,
Google adventures out along the yield curve [updated]
By John McDermott and Cardiff Garcia
Here’s a corporate bond mystery for you.
Google has $36.7bn cash on hand as of the end of March, according to its Q1 SEC filing. $16.9bn of this cash is held overseas.
Corporate balance sheets: when will the real spending begin?
A quick rewind is necessary to put this post in context.
We wrote repeatedly last year about the problem of non-financial companies hoarding their cash rather than spending it, and attributed the trend to a few different factors:
Basel liquidity rules, going neo-medieval
Can we talk a bit more about the scandal of Basel III allowing banks to give government bonds a zero risk weighting on their books? This time regarding Basel’s liquidity rules.
Actually, can we talk about the related global shortage of AAA-rated assets and what that means for sovereign debt as well?
Buried in recent regulations on Basel’s liquidity coverage ratio,
Balance sheet optimisation BOOM
All hail Standard Chartered’s new synthetic Collateralised Loan Obligation:
2 December 2010, Singapore – Standard Chartered Bank has completed its sixth Collateralised Loan Obligation (CLO), START VI CLO,
Citi sees no bubbles
At least not yet.
Although perhaps best to look away if you’re loaded up on US junk bonds, or Chilean and Indonesian equities in your portfolio.
Charts via Citigroup’s Global Bubble Tracker, as compiled by Robert Buckland’s equity strategy team (click to enlarge):
Winding down at the BoE
What’s this? Some good news from the Bank of England?
Out this Monday — a slew of announcements related to the Old Lady’s support programmes for British credit. They include (drumroll please) the following:
Forget quality
Jake of Econompic Data on Monday posted a couple of interesting charts emphasizing the remarkably similar performance this year of corporate bonds with different ratings:
He notes that there’s a roughly 4 per cent difference between the top-performing bonds and the bottom-performing bonds,
QE and exploding pensions, again
Citi is back with another take on low bond yields and pension accounting.
And before you fall asleep (wake up!) this is an update of Citi’s March 2009 note on quantitative easing and exploding pensions.
Bonds, breaking for the Swiss border
Tinned food? Check. Bunker? Check. Emergency smokes? Check.
Rolex watch, Toblerone, fondue kit, cuckoo clock? Check.
There’s a very Swiss theme to this week’s European Credit Alpha note from Barclays Capital.
Yuan-ted: McDonald’s new bond
Two global titans — one of fast food and one of the world economy — have teamed up in the debt market. For, McDonalds has become the first foreign corporate to issue a renminbi-denominated bond.
The Thursday press release from offer manager Standard Chartered:
What AAA corporate yields tell us
Felix Salmon suggested on Tuesday that corporates would never trade through Treasuries.
In fact, he wrote (our emphasis):
The only way for JNJ to trade through Treasuries would be if somehow there were worries that the US government was simply not going to pay some of its bonded obligations — while at the same time there were no worries at all about JNJ making its coupon payments.
And the junk bond rally sailed on
Why did junk bond issuance reach new heights last week? And why has it nearly reached an annual record high this year?
While yield-hungry investors are probably looking for anything they can get, it seems a few things have happened this year for the stars to have aligned so neatly for junk.
This is Dave’s moment
Finally. The moment David Rosenberg has been waiting for…
As the Gluskin Sheff economist stated in his regular Breakfast with Dave note on Wednesday (our emphasis):
Well, it took some patience but it looks like the economic environment I was depicting this time last year just shortly after I joined GS+A is starting to play out.
Pfffft to more M&A
Oh look — another investment bank pumping a global M&A recovery.
But we liked this note — from Credit Suisse on Wednesday — because the evidence they laid out for more M&A really suggests something much more interesting:
Quixotic QEasing
Here’s an interesting tidbit to trot out in the debate over the shape of the US recovery.
The Federal Reserve has been quick to highlight the speed and intensity of its policy movements, most notably its quantitative easing and interest rates.
A Goldman opportunity?
Goldman Sachs, everyone’s favourite scandal bank, took advantage of a small opening in the corporate bond market on Wednesday.
According to Bloomberg, companies sold $6bn in debt on Wednesday, the most in five weeks.
Bank of England, corporate bond buyer of last resort
Corporate bond markets are in a febrile state (again).
Enter, the Bank of England (again).
The Bank’s Asset Purchase Facility was created for just such conditions, aimed as it is, at providing liquidity in credit markets.
Whither corporate bond issuance?
“Forget the shorts”, as FT Alphaville noted on Friday. Company and financial bond issuance has virtually collapsed in Europe in recent weeks amid fears over the eurozone’s public debt problems and US financial reforms.
Forget the shorts, issuance is slaughtered
Another side-effect of recent market volatility: the death of corporate credit issuance.
Related links:
‘Gun shy markets’… – FT Alphaville
Risky like it’s 2007 – FT Alphaville
What happens when the risk-free rate isn’t risk free?
“Corporate finance is built on the idea that companies are more likely to go bust than governments.” Discuss.
According to the thinkers at the Economist, it is time to rethink the notion that the risk-free rate can always be used as a basis for pricing other assets:
The men who short-sold the world
Well, not quite. But shorting specialists Data Explorers did come up trumps on Monday with a report which took a global perspective on the last twelve months’ short and long positions.
According to Data Explorers,
More good news on corporate default rates
We wondered whether corporate defaults had peaked towards the end of last year after Moody’s reported the first decrease in the speculative-grade default rate since January 2008, down from 12.9 per cent in November to 12.5 per cent in December.