Archive for March, 2014

Sunday Evening Hilsenrath

Sunday, March 23rd, 2014

In my final post Friday I mentioned that some of my contacts in the market were opining that the terminal funds rate would be something lower than 4 percent which many had previously considered an expression of monetary neutrality. In this insightful article by Jon Hilsenrath he points out that ...

Bubble Trouble: Covenant Lite Loan Redux

Sunday, March 23rd, 2014

The FT has a piece on the rapid growth of covenant light loans recently. These loan remove certain covenants which mandate that the company must hit certain performance measures or maintain certain financial ration measures which would if breached trigger defaults.These loans were popular prior to the financial crisis and ...

Biotech Bashed

Friday, March 21st, 2014

The Nasdaq suffered significantly larger losses than its Dow and S and P cousins today. The reason is that biotech stocks took a pretty hard fall today. The proximate cause for the declines was a letter from Democrat members of a House Committee which questioned pricing of a hepatitis drug. ...

Swaps

Friday, March 21st, 2014

I was checking emails and found a note on swaps for the day. Spreads closed 1/2 to 1 basis point tighter across the curve except for 2 year spreads which widened 3/4. The 2 year note is special in repo and that aided and abetted the widening. Clients were better ...

Bear Flattening

Friday, March 21st, 2014

Merrill Lynch Research with a piece on the potential for a bear flattening of the curve similar to 1994. In October 1992 2s 30s peaked at 369 basis points with 2s at 3.60 and bonds at 7.29. I believe the 10s 30s spread was 110/115. Fast forward to late 1994 ...

Inconvenient Storm

Friday, March 21st, 2014

I just stumbled upon this one which relate that there is a potential for another mega storm to hit the Northeast next week. The description of the potential for the storm makes it sound like something from Al Gore's stump speech on climate change. It is a fascinating article though ...

Treasury Market Thoughts

Friday, March 21st, 2014

The Treasury yield curve is in motion today and market participants are piling into flattening trades as if the caboose is pulling out of the station any moment. I have heard of real money and hedge funds establishing positions long the long end versus the belly. One veteran trader with whom ...

Corporate Issuance This Week

Friday, March 21st, 2014

Weekly Stats 03.21.14 {FIFW NSN N2SODT6TTDSN <GO>} +------------------------------------------------------------------------------+ IG CREDIT: $19.25b Priced in Second Lowest Volume Week This Year 2014-03-21 16:27:29.820 GMT By Lisa Loray March 21 (Bloomberg) -- Issuance fell 57% for the week ending March 21 as $19.25b priced from 14 issuers in 21 tranches, the second lowest volume week YTD. * Compares to $45.25b from 34 ...

Morning Miscellany

Friday, March 21st, 2014

Mortgages had traded very cheap to treasuries yesterday with 4 .5 as much as 8 wider to Treasuries. Real money buyers and hedge funds buyers emerged at the wider  spread levels and MBS closed at best levels of the day. One dealer noted that it appeared to him that positions ...

Miscellany

Friday, March 21st, 2014

This is going to be a tough day to follow unless one of the Fed speakers provides a reason for some histrionics. The Japanese markers closed for a holiday and that leaves us a little rudderless and themeless at the open here. One salesman thought that participants would watch markets ...