As you well know, when credit spreads for a certain issuer invert, it means there is concern about the credit. The most visible and broad intra-day index in the credit markets is the CDX. Their 5yr and 10yr spreads are now the narrowest (i.e. still normal, not inverted) that they've been in ~15 months. Please be aware that the CDX does not contain and banks/finance entities (who's curves have been flat/inverted for some time).
One of the primary drivers of the longer term sustained rally in credit has been strong retail demand for the product. The most recent AMG data shows sustained, but subdued, inflows into taxable bond funds....but if you remove ETFs, that turns to the first (small) outflow in several weeks.
While this observation may be too late to make you any money during this move, it's one to be aware of nonetheless. The CRB RIND index is a commodity index made up of basic commodities (details here) that are not primarily traded on a futures exchange and therefore can be viewed as less influenced by speculators. During August, the regular/normal CRB index rallied strongly causing some to believe commodity prices were moving higher. Astute observers, namely Julian Garran at UBS, warned not to believe the hype and that commodities were still weak and weakening. Alas, he proved right this time as the broader index eventually retreated. On Bloomberg, it is CRB RIND .
The Sunday Times is reporting (via FT Alphaville) that Goldman will be zero-ing out their bonuses and attempting to hold their revenue pay out ratio to an all time low of 35-40%.
As recounted by former Senator Phil Gramm, when Abraham Lincoln first met Harriet Beecher Stowe, he allegedly said "so I finally get to meet the woman who wrote the book that started the Civil War." Her book had humanized the outrage of slavery and moved it from a distant concept/practice to a painful reality that needed action. Senator Gramm went on to say that the movie Waiting for Superman will be the Uncle Tom's Cabin of our generation.
No comments:
Post a Comment