Corporate Bonds

December 30th, 2008 3:53 pm | by John Jansen |

Corporate bonds are firmer once again as the march of buyers continues. Trading volumes remain light as many are in year end mode. Participants uniformly report that the flow of business is skewed to the buy side and selling is infrequent.As I mentioned yesterday, some participants expect a heavy slate of issuance as 2008 fades into financial oblivion. One salesman noted that he has clients with a pile of cash and their dream is to invest it as the new issue come to market in January.

That will be an important test for the market and will provide some real world data points to observe if credit market rehabilitation is truly underway.

Here are several examples of the move in spreads on quality corporate bonds.

The Budweiser 2018s issue was trading T + 510 about two weeks ago. That paper is 410 bid today.

IBM has several issues in the 9 year and 10 year part of the curve which before the rally traded T + 370 ish. That paper is mostly 275 bid now.

Con Edison has a 2018 issue which traded at T+ 445 a week ago. That bond is now 385 bid.

There are quality accounts looking for solid investment grade bonds and spreads are marching tighter.

Once again, in the interest of honesty and full disclosure I am long the EFT LQD. I also own some Wells Fargo paper in 2013 and some GE paper in 2012. Very small amounts on each and each is  in the Across the Curve hold to maturity portfolio.

I also own some PSY. That is not for the faint of heart. I averaged into that one and I have a tiny profit.

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  1. 2 Responses to “Corporate Bonds”

  2. By BL on Dec 30, 2008 | Reply

    Today’s action in symbols I track:

    Investment Grade (LQD) + 0.87%
    Junk (PHK) + 1.47%
    Tax Free Municipal (MUB) +0.28%
    Intermediate grade (HYG) + 0.31%

    Sonic Automotive (SAH) downgraded to junk, but the stock was up over 10% on GMAC and general market rally.

    Volume was slightly above average in the bonds but they were erratic, rallying very early, falling, then recovering. Generally, the trend continues, I’d say. I still predict recovery to better than pre-Lehmen for LQD, and the other bond funds to about pre-Lehmen.

    BL

  3. By BL on Dec 30, 2008 | Reply

    Speaking of BlackRock (PSY) and MBS

    Dec. 30 (Bloomberg) — The Federal Reserve chose BlackRock Inc., Goldman Sachs Asset Management, Pacific Investment Management Co. and Wellington Management Co. to manage a $500 billion purchase of mortgage-backed securities it plans to complete by June

    http://www.bloomberg.com/apps/news?pid=20601103&sid=a3ipTfnfgcFQ&refer=news

    A hundred billion here, a hundred billion there, and soon we’re talking real mortgages….

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