Here are the positive factors for the credit markets as I see them.....the Vix is dropping, credit curves are normalizing (steepening), inflows to the sector remain very strong (avg +$.3.3B a week), and Goldman is raising money to buy risky assets.
The negative factors are well known and will be confirmed or countered this week during earnings season. I suspect the trend we could see emerge from the financials is raising equity (of some form) to pay back TARP. This will allow the 'winners' to pay folks >$250k and quickly illuminate those that are struggling.
In an odd turn of events, AIG Financial Products, the division that caused AIG all the pain, has decided against signing the recent Big Bang CDS protocol. They allege it is due to the fact that all their positions are legacy and thus pre-protocol and that they are in wind-down mode.
This dovetails nicely with the most recent DTCC data which shows that net CDS outstanding (U.S. single name) is down 16% since October 31st. The trend is fairly straightline showing drops for the last 1 month as well.
Bloomberg has added a succinct summary of the new protocol to it's usual fine analytics. Type SNAC on your terminal to see it.
The richest (tightest) sectors are healthcare/pharma, industrials and telecom.
The cheapest (widest) sectors are REITs, financials and insurance.
The average price of a bond in the JPMorgan credit basket/index is ~$93.25.
No comments:
Post a Comment