Both Bloomberg news and the WSJ have headline articles questioning the vitality of this rally. This chart is from Bloomberg's Caroline Hyde (click on it to enlarge):
Obviously the immense new issue volume, which last week gave us confidence, is now receiving more scrutiny. JPMorgan notes that net new issuance is only ~$15B YTD (vs ~$200B net for all of 2008).
Yesterday, I mentioned the massive underwriting fees that are being paid. When JPMorgan and Citi recently advised Harrah's on a bond restructuring, they were compensated in junk bonds. I suspect this trend may continue; you may recall that this is not the first time this has occurred. CSFB's bankers received part of their 2008 bonus in junk bonds....it was called the Partner Asset Facility.
I'm surprised that the comment from the ECB's Kranjec about buying corporate bonds has not garnered more attention or at least spread reaction.
Yesterday's secondary market volume was quite high at $14.7B. This was up ~36% from the previous day. Here's a quick quiz for equity investors....how many individual issuers traded yesterday? 504. That compares to >5,000 issuers in the US equity market. As I've mentioned before, but not recently, liquidity is largely confined to recent new issues. Of the 25 most active bonds yesterday, only 4 were not new issues.
The CFA institute noted that they have a record 128,600 candidates taking the CFA exam in June. Those candidates can expect pass rates of ~35%. I, for one, am glad that I've got my CFA and that I am not required to disclose how many attempts it took.
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