That being said, this week's direction in spreads will likely come from the treasury market. I say this as we are likely to have a dearth of credit news ahead of earnings season and a very light calendar. The US Treasury will issue new 3yr, 10yr and 30 yr bonds this week. Since mid-June, credit spreads seem to be following the yield on the 10yr. So, if you believe that treasury yields are headed higher, like Barrons does, then we could have a tough time in credit.
There is one story that could gather some attention this week.....the MBIA 14s (surplus notes) have a coupon coming due on July 15th. During the split of the company earlier this year, these bonds went with the 'bad company' and are now junk rated and trade in the low $30s. Rating agency pundits will note that they were originally issued with a AA rating. If this coupon is not going to be paid, holders are notified by July 8th. Looking at the SEC/Edgar filings of the top holders, you'll see that >50% of the bonds are held by equity mutual funds. It will be interesting to see how they react.
Yes, lenders should be in the driver's seat at this stage of the cycle (note that I did not say 'crisis'), however I am encouraged that some high yield companies have the foresight and the ability to make extensions on their debt.
First Goldman Sachs gets pilloried by Rolling Stone magazine as the embodiment of evil....now one of their own employees may have stolen their equity prop trading program.
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