Credit Thaw

[The Voice of Reason]

The TED spread is below 100BPS

Libor-OIS is down to 93BPS

you may not know what this means, but everyone understands numbers

the TED spread was last below 100 on Aug 15

to put the 98BPS TED in perspective, it averaged an incredibly low 12 BPS during the liar loan free credit years, and peaked at 332 just a little while after Lehman failed.

getting back below 100 is a sign that the credit markets are thawing and that money is begining to flow again.

the 93 on the Libor-OIS lies between the 364peak and low of 9

as these numbers continue to drop over the next weeks and months the credit market will move more fluidly and developers will un-stall projects, people will buys and sell houses, and life will function more normally regardless of how badly your 401k was hit.

[Charlotte_native]

A little bit more laymans terms? What does this number come from and what does it exactly mean?

[The Voice of Reason]

A little bit more laymans terms? What does this number come from and what does it exactly mean?

[suburban george3]

It's glad to see this happen.. as businesses have been hoarding cash and putting a freeze on capital expenditures to have liquidity for daily operations. It's still going to be awhile before it seems like 'normal' again...

[Charlotte_native]

Gracias, great to get some education today and nice to see what might be an indicator of some improvements ahead!

[Gard]

Was just reading about this. There are a ton of great signs out now that are pointing to the economy hitting a floor and spreading the seeds of recovery. For one thing, investors have shown a rapidly increasing interest in junk bonds again, which traditionally have a higher risk, but earn a higher interest rate. Investors buying up these bonds could very well help save the likes of Circuit City, GM, Chrysler, Ford and others. With the greater interest in these bonds, its easier for these companies to raise money. Last week, investors moved $882 MILLION into junk bond funds, the largest move in one week since 2003. The issuance of commercial paper (companies use it to pay short-term financial needs, such as payroll) has skyrocketed due to increasing willingness of investors to buy it and as put the total outstanding commercial paper debt at $1.76 Trillion(an increase of $83.1 Billion), which is almost back to what it was before Lehman Brother's failure, which was $182 Trillion. This will certainly help job losses, as companies will be able to get the quick cash they need to operate and pay employees, giving them less incentive to lay them off since they will be able to afford them easier. The Fed also announced it would hold the current rate steady in an effort to keep the thaw moving along. Mortgage rates also tumbled to 5.01%

This is far from over, but I think we can all breathe a sigh of relief as there is a crack of light showing at the end of the tunnel now.

[monsoon]

^Don't hold your breath. The buying and selling of stuff written on paper no longer means much. Until the real problems of this economy are addressed the above is pretty much meaningless. The federal government has funneled $1.9 Trillion dollars into the financial system in the last 12 months and it has made no difference. The failure of this unprecedented amount of money to stop the meltdown is evidence enough of this. To make a long story short, these indexes do not mean anything now.

The real economy has failed because we have been too focused on paper wealth which has encouraged, at a macro levels, the transfer of huge portions of our industrial base to other countries. If that wasn't bad enough, the false paper economy has resulted in whats left of the domestic base being converted to real estate development. It has meant that we have squandered huge amount of resources building unneeded things as McMansion developments, vanity skyscrapers, and sprawling starter home development that nobody can now afford or wants. The only other industry that has grown at substantial levels in the USA has been weapons development and production. (something of dubious value)

What we are seeing now is the collapse of the paper economy because there isn't a real economy behind it now to support it. This is a basic reset in how things are going to work and job layoffs are accelerating. It is being called a credit crisis, but the real problem isn't the lack of credit, its the lack of companies and individuals that can pay back that credit. Here in my sunbelt city, where the economy is supposed to be good, there are 100s of layoffs being announced everyday now since the first of the year. I have not seen anything like this and I was born and raised here.

The United States is entering into uncharted territory. There has never been this much money borrowed by the government and we have never been so dependent upon foreign sources for so much of our basic needs. If buying foreign oil is bad, then I don't know why buying foreign shoes is good. The bottom line is that things are going to get worse before they get better.

[The Voice of Reason]

^Don't hold your breath. The buying and selling of stuff written on paper no longer means much. Until the real problems of this economy are addressed the above is pretty much meaningless. The federal government has funneled $1.9 Trillion dollars into the financial system in the last 12 months and it has made no difference. The failure of this unprecedented amount of money to stop the meltdown is evidence enough of this. To make a long story short, these indexes do not mean anything now.

The real economy has failed because we have been too focused on paper wealth which has encouraged, at a macro levels, the transfer of huge portions of our industrial base to other countries. If that wasn't bad enough, the false paper economy has resulted in whats left of the domestic base being converted to real estate development. It has meant that we have squandered huge amount of resources building unneeded things as McMansion developments, vanity skyscrapers, and sprawling starter home development that nobody can now afford or wants. The only other industry that has grown at substantial levels in the USA has been weapons development and production. (something of dubious value)

What we are seeing now is the collapse of the paper economy because there isn't a real economy behind it now to support it. This is a basic reset in how things are going to work and job layoffs are accelerating. It is being called a credit crisis, but the real problem isn't the lack of credit, its the lack of companies and individuals that can pay back that credit. Here in my sunbelt city, where the economy is supposed to be good, there are 100s of layoffs being announced everyday now since the first of the year. I have not seen anything like this and I was born and raised here.

The United States is entering into uncharted territory. There has never been this much money borrowed by the government and we have never been so dependent upon foreign sources for so much of our basic needs. If buying foreign oil is bad, then I don't know why buying foreign shoes is good. The bottom line is that things are going to get worse before they get better.

[monsoon]

I've said this before but it bears repeating. If our economy was destroyed by too much easy and exotic credit, then it won't be fixed by creating more easy credit. Responsible borrowers can get credit especially if they go to local institutions to borrow the money who are not in trouble. (the stuck to the centuries old fundamentals of banking)

[The Voice of Reason]

I've said this before but it bears repeating. If our economy was destroyed by too much easy and exotic credit, then it won't be fixed by creating more easy credit. Responsible borrowers can get credit especially if they go to local institutions to borrow the money who are not in trouble. (the stuck to the centuries old fundamentals of banking)

[monsoon]

.....

I could clearly go on and on with this stuff because I am an opinionated guy and deal with this crap at work every day, but I will try and keep it simple here because this is not a debate. ....

[The Voice of Reason]

now, I take that as a challange.

and I am quite certain that was an attack on me and an insult.

you seem hell bent on creating a conflict, so I ask you to re read what was written.

let me be clear here monsoon, I never said you were wrong about your opinions. I said you were making this a larger issue than I am commenting on.

The credit freeze is just one tiny piece of the pie. I created this thread because it is a very important piece of the pie if you are interested in development, cities, financing mass transit, public works, etc..

it is my understanding that the focus of this web site includes those interests. So blame whomever you want for whatever you want, this is not important to me, but regarding the subject of this thread and its relevence to these forums, have no mistake this is a good thing.

My personal feelings as to whom is at fault, and as to what conditions caused the greater mess we are in were not experssed in this thread and if they were, they might not be any different from your own, so before you judge me, and my role in your bad day please get all of your information together. 6months from now you will be no more right or wrong than you are today.

Regarding this whole mess, two facts are simple. The Chicago school of economics won the day, and then greed went and ruined it for everyone. Now, many people are paying for it, you and I included.

If you wish to blame any of this credit crisis on me I would be happy to provide you with dozens of reasons as to why I am the least of your worries. untill then keep your baseless assertations to yourself.

[The Voice of Reason]

Further evidence of the credit thaw was reported today.

The federal reserves consolidated balance sheet is continuing to fall. a Bloomberg article said its been 6 weeks in a row.

The high water mark was 2,310,000,000,000 on December 17

as of Feb 4 the number was down to 1,920,000,000,000

Another indicator shows that companies raised 15 Billion in NEW debt this week bringing the 2009 total to 189.5 Billion wich is 39% ahead of last year. This is a very good sign. especially if these bond issues accelerate and investors continue to warm to higher risk debt.

I know that High Yield bond funds are raking in all kinds of new investors. these are the loans that keep companies from going abkrupt, so they are the loans that save jobs!!!

[Commoner]

Further evidence of the credit thaw was reported today.

The federal reserves consolidated balance sheet is continuing to fall. a Bloomberg article said its been 6 weeks in a row.

The high water mark was 2,310,000,000,000 on December 17

as of Feb 4 the number was down to 1,920,000,000,000

Another indicator shows that companies raised 15 Billion in NEW debt this week bringing the 2009 total to 189.5 Billion wich is 39% ahead of last year. This is a very good sign. especially if these bond issues accelerate and investors continue to warm to higher risk debt.

I know that High Yield bond funds are raking in all kinds of new investors. these are the loans that keep companies from going abkrupt, so they are the loans that save jobs!!!

[The Voice of Reason]

Interesting comment w/r/t high yield. I was (pleasantly) surprised by the new debt issuance numbers you posted. I was wondering what the rating profile of this new debt is and whether it differs pro rata from this time last year. In other words, are investment grade companies having an easier time rolling paper, or (at the risk of using terminology that will quickly be usurped by the commentariat) are companies that were on the sidelines last year now able to issue junk?

[The Voice of Reason]

I thought it worth updating this thread.

I noticed today that the TED is down to 92BPS

Since I first wrote this post it popped up to 110 as things got sticky with the market but now things are setting out again as consumer confidence grows and people get back into the markets.

There have been more debt deals but there have also been a ton of debt to equity conversions.

as merger activity heats up and the market responds to that it will be interesting how everyones confidence will change. I hope we get more commercial lending do we can see more action on these boards again.

cheers!

[Charlotte_native]

as merger activity heats up and the market responds to that it will be interesting how everyones confidence will change. I hope we get more commercial lending do we can see more action on these boards again.

[The Voice of Reason]

There are a few article out today kind of related.

HSBC is planning on selling its London, NY, and Paris. The though is that these 3 buildings are worth about 2.24 Billion, but that figure is 40% less than they would have garnered in 2007

another article today was about the auction of the assets of Whistlejacket SIV fund.

This insolvent Structured Investment Vehicle was worth something like 7 Billion, and today in London about 5 billion worth was Auctioned off fetching about 3.3 billion.

this you can say is bad news for investors/creditors because they have $0.671 per $1.000 dollar

but for the 14 bidders I guarantee some good deals were had. the investors in those deals will be rewarded and ultimately it is those kinds of transactions that will attract investors back to the capitol markets, and truely get credit flowing again so we can see more cranes rise over out cities again.

Once the institutional investors dive back in we are green though, and the insurance companies are pretty scared still.

[The Voice of Reason]

It is on like Donkey Kong!

Ted dropped to .85 today.

and with all the quarterly reports coming out it is kind of crazy, but companies are publishing BAD, and I mean it BAD results, but the market is still reacting favorably.

I am guessin that this is a result of investors jumping back into the market because they do not want to be left behind.

a company reported a 1.3 billion quarterly loss yesterday and that was well worse than estimates, but the stock still went up because people FEEL SAFER.

as this continues to happen in Equity markets, the capitol markets will continue to loosen up.

Basicly the day they break ground on the new LEED Platinum building about to start constrictin here in Hartford, is the day I wont worry about a credit thaw any more.

its a month or 2 off.

[monsoon]

......I am guessin that this is a result of investors jumping back into the market because they do not want to be left behind......

[The Voice of Reason]

Dude, following the crown is a market tradition.

do not pretend this is a new thing. the way you can best make money is by prediciting the lemmings movement and beating them to the move. the first half to make a move make money on the deal the 2nd half lose money on the move.

here is a perfect articke for this thread. not so much for your lamenting against the way of the world, but it does give some insight into why people do this and honestly why its not a terribly dumb idea.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

related to the credit thaw

Investors injected $1.79 billion into U.S. high-yield bond funds in the four weeks ended April 29, according to AMG Data of Arcata, California. Buyers realized that the risk of high corporate defaults was already reflected in the yield relative to benchmark rates, said Citigroup Inc. high-yield strategist John Fenn.

for Monsoons benefit

There is about $11 trillion in cash earning minimal profit on the sidelines, said Todd Youngberg, who helps manage $3 billion in high-yield assets at Aviva Investors in Chicago, in a note to investors today. Some of the money is moving into junk bonds, he said.

you see, 11 trillion is a lot of money, and even though a ton of money has started to flow back into all the markets, there is still a crap load of money to follow. all that eventual pent up demand will drive up the price so if you buy anything now "low" it will rise ad the deamnd grows.

sure people will be more patient and hesitant because they got burnt, but they are still by their nature greedy and will get back in. at least most will.

and the funny thing is bonds are concidered safer, so bonds, being traditional and a little safer will likely attract more of that 11 trillion this time around and the hedge funds and exotic investment vehicles will get a smaller percent.

Good credit thaw info

Jump in Issues

The rally spurred more speculative-grade companies to issue debt, taking advantage of a drop in spreads. Sales of high-yield bonds in 2009 jumped to $21.8 billion from $4.4 billion in the previous four months, according to data compiled by Bloomberg. Issuance this year compares with $18.4 billion in the same period of 2008.

The percentage of high-yield corporate bonds trading at distressed levels plunged to the lowest level since September, when Lehman Brothers Holdings Inc. filed for bankruptcy, freezing global credit markets.

The percentage of junk bond issues with yields at least 1,000 basis points more than Treasuries of similar maturity fell to 57 percent yesterday from 70 percent March 31, according to Merrill Lynch data. The ratio was 40 percent at the end of September and 19 percent at the end of April 2008. A basis point is 0.01 percentage point.

EDITED TO MAKE MAKE MY IDEAS STAND OUT MORE FROM WHAT I PASTED.

MY THOUGHTS ARE IN BOLD

[monsoon]

Just as a FYI. I normally don't read cut and paste posts where the poster copies someone elses work to somehow make their point for them. Occasionally I will delete said posts especially if they violate our rules in this regard and in particular if it is related to copyright.

[The Voice of Reason]

Just as a FYI. I normally don't read cut and paste posts where the poster copies someone elses work to somehow make their point for them. Occasionally I will delete said posts especially if they violate our rules in this regard and in particular if it is related to copyright.

[monsoon]

.....

I can post 5 links a day as to indicators that the credit thaw is begining to gain steam. ....

[The Voice of Reason]

Try and spin it as much as you like Monsoon, the information I posted was factual information. It indicates a market thaw. if you feel it a good idea to find contrarian information by all means go ahead. the problem is that when money flows into these markets it is tracked by public and private organizations. it is factual information. I was merely linking an article that contained some of that information. to further demonstrate the thawing markets.

I do not think you can succcessfully tell me that the markets are not thawing. Something I celebrate both personally and professionally.

I think you should stick to trying to convince the world that a credit thaw is not a good thing. Something that is debatable.

I have access to umteen sources of financial information that likely no one else, or very few other people on this board, have access to (Bloomberg anywhere terminal). So when there is something I can provide a link to I do my best to help out.

EDIT : TED is down to .83