Corporate Bonds

October 14th, 2008 2:34 pm | by John Jansen |

The IG 11 is last quoted 176 /177 ½. That is off the best levels of the day which were right out of the chutes this morning when the index traded around 172. The mid market close of IG 11 on Friday was around 219 so even though we have retreated somewhat the sector is retaining significant gains.The IBM 10 year note which I have taken to chronicling here which priced last week at T + 3 7/8 percent was recently quoted 355/350. The issue did trade as wide as 420 subsequent to its pricing.

One of the salesman with whom I speak regularly suggested another bond for following corporate bond market sentiment. There is a very short Morgan Stanley bond, the 3.875s of January 15 2009, which has gyrated wildly lately. On Friday, as the stock market plumbed new lows this bond traded for 86 cents on the dollar. That is a bond issued by Morgan Stanley with a maturity of less than three months.

Today all is well with the world and the bond changes hands between 98 cents and 99 cents.

Regarding the near term course of spreads I did speak to one portfolio manager who held a less than sanguine view.

He cited three factors for his caution.

The injection of public money is a worthy first step but the crisis will not resolve until there is a groundswell of optimism from private investors.

The second factor is time. It will take time to repair and rehabilitate the market.

Finally, the economic fundamentals are suggestive of a sharp contraction lasting three quarters or four quarters. Against that background, a cautious approach to corporates is in order.

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  1. 2 Responses to “Corporate Bonds”

  2. By Owe Jessen on Oct 14, 2008 | Reply

    Sorry for a dumb question, but i can’t find it on with google or yahoo: Whats the IG 11 you so regularly talk about?

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