Bonds

New spotlight may threaten muni bond prices

29 Apr 2008

A new index on municipal debt default swaps might add some transparency to the $2.6 trillion market, but it could also pressure prices. If shortsellers push down the index, those who use it to value their muni bond holdings will suffer.

Loan market edges from frying pan into fire

28 Apr 2008

April has been the best month for loans since the credit crunch started. Banks sold tens of billions of dollars worth as demand from distressed buyers pushed prices up. But rising defaults could pummel the market in the coming months, keeping it closed to desperate borrowers.

Leveraged loan sales highlight banks’ predicament

24 Apr 2008

Deutsche is unloading some $5bn of loans by lending to the buyers at a belowmarket interest rate. TDC is taking advantage of low debt prices by buying its own loans at a discount instead of paying them down at par. Lenders are paying now for their earlier credit exuberance.

Banks’ preferred issues are no boon for buyers

23 Apr 2008

Capitalstrapped banks have both regulatory and financial reasons to issue preferred stock. But investors should think twice before clamouring to buy an instrument that bundles some of the worst aspects of bonds and stock with few of their advantages.

Auction-rate mess threatens private bank cash cow

18 Apr 2008

A big advantage of private banking is its stickiness. Banks like UBS, JPMorgan and Merrill snare ultrarich clients in a web of trust, brokerage and estateplanning services. But the blowup in the $330bn auctionrate market has the carriage trade reaching for its buggy whips.

Derivatives’ daisy chain is $455 trillion threat

16 Apr 2008

The ongoing breakneck growth in the derivatives markets, especially those involving credit, used to be cheered as a sign of bankers innovative acumen. But since the credit crisis exposed Wall Street s fragility, it s starting to look like an ominous development.

Prodesse capital-raising hints at credit appetite

11 Apr 2008

Funds investing in US mortgages have had a torrid time during the credit crunch. But Londonlisted Prodesse has finally got away a £10m capitalraising postponed from last year. That could hint at returning confidence at least to the higher quality end of the credit markets.

WaMu runs into Goldman’s Chinese walls

11 Apr 2008

The Wall Street powerhouse helped WaMu place $7bn of new stock on Tuesday. On Friday, its equity analysts recommended shorting the troubled US thrift's shares. That punchy call isn t as contradictory as it sounds but it does suggest Goldman s internal barriers are working.

Wall Street firms pick different exits from LBO loans

10 Apr 2008

Citi is financing a sale of $12bn of its loans, sparing it the likeliest losses but not all the worstcase exposure. Lehman, by contrast, is hanging onto first loss risk on $3bn of its portfolio but sharply cutting its maximum loss. Goldman is just selling. Why the differences?

Lehman borrows tarnished structure to offload hung loans

4 Apr 2008

The firm s Freedom CLO uses the same technology that ignited the buyout debt boom. But now, it s being used to clean up the rubble. It may limit Lehman s losses and, if defaults in the portfolio are modest, it could give the firm a windfall.

US economic pig now Fed and watered

18 Mar 2008

Bernanke is slopping nearly $450bn of new liquidity into the market's trough and is watering it with a 0.75% rate cut. But the US economic pig needs a diet and exercise, not more truffles. Until real interest rates are positive, the economy will remain in poor shape.

Did the Fed put a safety net under bank default swaps?

17 Mar 2008

JPMorgan s governmentassisted purchase of Bear Stearns slashed the prices of default swap insurance on Bear s debt. Yet the cost of insuring against other bank defaults continues to rise. Investors should sell protection if they think the Fed really won t let banks to go bust.

Buy credit, sell equities

13 Mar 2008

Even after Tuesday s big rally, credit spreads are priced for Armageddon. Stocks are well down from their 2007 highs, but don t discount anything worse than a mild slowdown. That looks optimistic. The technical problems in the credit market have a created a big opportunity.

Should the US government insure muni bonds?

12 Mar 2008

It might bring in some welcome revenues. But Rep. Barney Frank s proposal that the federal government get into the muni bond insurance business doesn t solve any problems. Better to eliminate the dualrating system for munis. That would remove the need for as much insurance.

Carlyle fund’s woes highlight uncharacteristic strategy

11 Mar 2008

The firm s Carlyle Capital affiliate is on the brink after making a relatively simple, if highly leveraged, bet on agency securities. That seems almost naive compared to the diverse and sophisticated investing Carlyle is known for. And it may not be what investors expected.

Multilaterals will find life easier when liquidity tightens

11 Mar 2008

The Asian Development Bank is looking at relaxing its social and environmental standards bilateral aid donors like China provide money with fewer conditions. It should wait. Tightening world liquidity will leave ADB and other multilateral banks with much less competition.

US mortgage bailout options

11 Mar 2008

Pressure is growing in Washington to aid underwater homeowners. Robert Cyran handicaps the various government bailout plans.

Is commercial real estate the next subprime?

19 Feb 2008

Fears are mounting that it will be. But the market is more established than its homeloan cousin, with better data, players with skin in the game, and less frenzied demand from CDOs. That might not be enough to stave off writedowns and defaults. But they shouldn t be as onerous.

Falling Libor means pain for banks, reprieve for buyout firms

19 Feb 2008

The benchmark interbank rate has plummeted nearly 275 basis points in five months. That s given banks with stuck LBO loans another headache. But stretched privatelyowned companies benefit from lower debt servicing costs. Buyout firms won t be so lucky next time.

Wall Street’s next clash with Spitzer has far higher stakes

15 Feb 2008

The New York governor backs a plan to split monolines muni and structured finance businesses. FGIC wants to do so. But banks and investors holding FGICinsured debt could lose far more than they paid to settle their clashes with Spitzer in the past.