From The Daily Reckoning. This headline was the most important thing I read today. The follow with: On the basis of credit default swaps, which are used to speculate on a government’s ability to repay debt, the 10-year note reached a record high of 16 basis points on March 12. German bonds traded at 15 [...]
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Super Senior CDO Debt and the Banks That Loved It
This clearly written FT article discusses why banks loved this tranche of CDO debt and why it is now such an issue: Sometimes they did this simply to keep the CDO machine running. But there was another, far more important, incentive: regulatory arbitrage. Most notably, because super-senior debt carried the AAA tag, banks were only [...]
Muni Bond Woes
In the equities market one crisis is usually replaced by another in short order, so that only the really big issues are discussed years later. For instance, the Bear Stearns collapse is already a footnote. Not so, in the municipal bond market, which still talks about the 15 year-old Orange county default, and who, collectively, [...]
Stat of the Day: Why you can’t count on rebate checks to help anything
This is from the always entertaining Daily Reckoning. Writing under the pseudonym The Mogambo Guru, the analyst points out that: The interesting thing is that Treasury Gross Public Debt is now $9.244 trillion, up from $5.65 trillion in the middle of 2001, when the current government-borrowing binge started going bananas, suddenly rising at a steady [...]
The Reason Behind the ARS Failures
With all the talk about the auction failures this is the first article that discussed the accounting changes that caused it. The market was a zombie for months, only propped up by the banks. When they pulled out the whole market ground to a halt: The demand for auction-rate securities dried up sometime last year, [...]
The Consequences of the Auction Rate Failure
Sometimes the best part of an online article isn’t the article itself, but the comments it generated. Below is an excerpt from a Dealbreaker.com post about the failed auctions. While it’s important to take any thing an anonymous message board poster writes with a grain of salt, this poster seems well informed: I was on [...]
The Unraveling of the Muni Market
With bond insurance meaningless and credit markets frozen what will it take to induce investors to buy? In the case of the Port Authority of NY: 20%. Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from [...]
Chinese Treasury Purchases – A Disturbing Trend
Gartman crunches the numbers and finds that China’s purchases of new treasuries fell off a cliff in 2007: Chinese Net Purchases of Treasuries in billions of dollars 2002 34.1 2003 47.9 2004 77.4 2005 84.9 2006 63.2 2007 -4.1 Chinese Purchases As A Percentage of New Treasuries Issued 2002 12.7% 2003 11.8 2004 21.3 2005 [...]
MBIA Downward Spiral Continues
Down 12% today and 80% so far this year. More pain to come: The AA rated debt fell as low as 88.5 cents on the dollar today, according to bond traders. That’s the equivalent of a yield of 18 percent, data compiled by Bloomberg show. The notes were trading at 97.5 cents yesterday, according to [...]
Do you trust the market or the credit ratings?
MBIA the worlds largest bond insurer has to offer a 14% yield to move its bonds although they are a AA rated company. The market values the firm at much less than double-A. The downward spiral has begun for this firm. Bloomberg has the details: MBIA needs the money to bolster capital and stave off [...]
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