The Relationship Between Bonds And CDS Spreads

As many readers have been requesting data on both intro and intermediate CDS topics, I am posting a paper on one of the most fundamental credit derivative concepts: how to equate CDS pricing levels with those of cash bonds. As new concepts emerge, more explanatory information will be provided. Enjoy the paper - compliments of Maiden Lane I.

Second Budget Hotel Bankruptcy In One Week, CRE Getting Monkeyhammered

First it was Extended Stay, which filed for bankruptcy last week (and whose unexpected filing may make life for CMBS participants very complicated as the law of unintended consequences strikes again). Today, it is budget hotel chain Red Roof Inn.

What Is Spooking Auto Supplier CDS?

Or maybe the correct question is "what wasn't" especially for the past 3 months... I touched earlier upon the pain that is still to be unleashed upon the autosuppliers when I discussed the Visteon CDS auction. However, it seems the credit market is already on top of this. A brief observation of the CDS (and to an extent the equity) levels of TRW and American Axle indicates that over the past week something has really spooked longs in the names.

Daily Market Recap

Strange day, with VWAP reversion ruling on no volume as has been the norm over the past 3 months.

Liquidity was so hard to come by that 2,000 bps TICK swings were almost a norm in the second half of the day, yet the SPY closed virtually unchanged.

Jim Simons Lasts A Whole Hour Without Chain Smoking A Carton Or Two

Much like our President who earlier announced he had quit smoking, with the exception of inhaling the occasional pack every time the mortgage spread passes 100 bps or gold gets close to $1,000. Deep thoughts from the SPARC-tamer himself. Oddly absent is a discussion of stochastic processes involving the massive loss of capital for LPs caught on the wrong end of a huge high-beta short squeeze.

Mass Layoff Events Continue Accelerating

It was only three months ago when people assumed that the turnaround in BLS' metric for mass layoff events meant an end to something or another. Nope. For the third straight month both mass layoff events and initial claimants for insurance picked up. There is nothing even remotely optimistic about this data... Which probably explains why unlike March when CNBC filled an entire day discussing this brand new datapoint that none of the anchors had heard before, today one would not hear a peep out of them on it. Next month: the 6 month MA gets surpassed on both indications.

Visteon Final Bond Recovery Price: 3 Cents On The Dollar

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test.