US bank guarantee fails to eliminate credit fears 3 Dec 2008 The version of this piece published yesterday contained incorrect data on the yield on Citigroup s governmentguaranteed bond. A corrected version follows.
The Fed’s quantitative easing: A guide for the perplexed 2 Dec 2008 The Federal Reserve looks to be taking a page from the Bank of Japan s book and using money supply growth, rather than interest rate targeting alone, to spur the US economy. With rate cuts proving ineffectual, it may have little choice. Dwight Cass explains.
Goldman’s $5bn US-backed deal a crowd pleaser 25 Nov 2008 It looks advantageous for the Wall Street firm, its regular bondholders and new investors who usually buy government and mortgage agency debt. And now Goldman has opened the market, rivals should get better rates. That s just what the market needs even if it is still a bailout.
US guarantee scepticism slams mortgage debt 20 Nov 2008 Fannie Mae and Freddie Mac bonds should be ideal for investors seeking high returns on lowrisk debt. But they re staying away in droves. That reflects growing uncertainty over whether the US government will make good on its guarantees.
Loan market’s acute pain may also be chronic 19 Nov 2008 Spiralling risk aversion and the collapse of the securitisation machine caused the corporate loan market to seize up. But potential secondary market problems threaten to keep some investors on the sidelines.
CMBS woes show economy is growing threat 19 Nov 2008 Interbank lending is thawing, so lack of liquidity no longer appears to be a mortal threat to banks. But they re not out of the woods the commercial real estate mortgage meltdown shows how the US economic downturn is just beginning to take its toll.
Convertibles push tech companies towards the brink 17 Nov 2008 US technology companies issued gobs of convertible debt in recent years and much of it is maturing soon. Low stock prices make conversion unlikely, and paying the debt off would drain precious cash. With refinancing absurdly expensive, issuers have few attractive choices.
Credit insurers don’t need new aid 17 Nov 2008 European suppliers are squealing because credit insurers are pulling back. The squeeze is real, but two large insurers are already backed by the Dutch and French governnments. The better way forward is for customers to speed up payments and let the market cull some weaklings.
Buyout loan orphans return to burden banks 13 Nov 2008 Just when Wall Street s leveraged loan headache had subsided to a manageable throb, more pain threatens. Loans repackaged for hedge funds are ending up back with banks as the schemes unwind. Worse, no one knows the extent of banks potential exposure.
Banks snub Fed’s New Year’s present 12 Nov 2008 The US central bank just offered $150bn of shortterm loans that can be drawn over the yearend period as a confidenceboosting measure. Banks only took $13bn despite a microscopic interest rate. Liquidity constraints no longer appear to be behind the lending freeze.
US bank credit logjam worsens automaker woes 3 Nov 2008 Despite Bernanke s helicopter assaults, lending tightened sharply over the last three months. Industrial borrowers are facing the toughest loan market in recent memory. And even prime consumers can t get loans which contributed to a collapse in US auto sales.
Basing loans on CDS a huge risk for some borrowers 29 Oct 2008 After being forced to make risky loans at low rates during the credit boom, banks are now dictating terms. Their latest twist is the use of credit default swap spreads to price credit lines. That may help get funds flowing. But some borrowers will tap those funds at their peril.
GE’s Pollyanna ratings fail to convince 28 Oct 2008 The conglomerate enjoys tripleA ratings but markets don t seem to care. Its debt trades at low investment grade levels and its credit default swaps are in junk territory. That s partly due to technical factors. But it also shows how irrelevant ratings have become.
US junk bond market girds for spike in defaults 23 Oct 2008 Half of all US high yield debt now trades at levels that usually indicate a serious risk of default. If past correlations between interest rates and credit risk hold true, it means about $180bn of debt will go toes up in the next year.
US watchdogs’ CDS campaign misses the mark 20 Oct 2008 SEC chair Cox says the credit derivatives market needs more transparency and antifraud scrutiny. Yes, its counterparty risk management and settlement processes should be improved. But regulators mainly need to do a better job of overseeing its participants.
US bank rescue worsens mortgage mess 17 Oct 2008 The government s plan to back Wall Street s borrowings has led investors to dump mortgage bonds in favour of bank debt pushing home loan interest costs up sharply. That should reverse, given time. In the meantime, the US has few options to give home buyers a break.
Day of reckoning for Lehman CDS holders 8 Oct 2008 Financial firms are about to learn how much they stand to gain or lose on derivatives linked to Lehman s credit. Lenders expect to recover little on the bankrupt firm s debt. That s bad news for credit protection sellers. Here s how they ll discover the extent of their woes.
US should ape UK’s medium-term funding guarantee 8 Oct 2008 The comprehensiveness of the UK bank bailout plan makes US efforts look rather ad hoc. Unlike the US, it contains a guarantee for mediumterm debt issuance by banks. That, in conjunction with capital injections, should go a long way toward breaking the interbank lending logjam.
Will Polonius bring down the US economy? 8 Oct 2008 Consumers are starting to heed the advice of Shakespeare s tightwad by cutting back on borrowing for the first time in a decade. Getting one s personal balance sheet in order is a smart move, but on a larger scale, less credit could further damage an already ailing economy.
Fed’s CP fix makes it look more like a bank 7 Oct 2008 The move to buy commercial paper may break that market s logjam. But it will be hard to reverse unless the Fed can convince nervous investors to lend directly again. By inserting itself between lenders and borrowers, it s acting like a bank. That could cause unforeseen trouble.