The Relationship Between Bonds And CDS Spreads
Submitted by Tyler Durden on 06/24/2009 - 03:31As 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.
Overalottment: June 23
Submitted by Tyler Durden on 06/24/2009 - 02:51- Chinese increasingly overdue on credit cards (MarketWatch)
- Japan exports plummet: 40.9% decline year over year, extends worst slump since WWII (NYT)
- Citigroup raises base salaries by 50% (Bloomberg)
- Ikea plans to halt investment in Russia (
Second Budget Hotel Bankruptcy In One Week, CRE Getting Monkeyhammered
Submitted by Tyler Durden on 06/24/2009 - 00:32First 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?
Submitted by Tyler Durden on 06/23/2009 - 22:24Or 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.
What Is Spooking Auto Supplier CDS?
Submitted by Tyler Durden on 06/23/2009 - 22:24Or 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
Submitted by Tyler Durden on 06/23/2009 - 20:10Strange 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.
Daily Market Recap
Submitted by Tyler Durden on 06/23/2009 - 20:10Strange 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.
Daily Credit Summary: June 23 - Narrow Ranges
Submitted by Tyler Durden on 06/23/2009 - 20:06Spreads were mixed in the US with IG marginally worse, HVOL a smidge wider, ExHVOL weaker, XO wider, and HY rallying (as intraday ranges were generally half their average levels).
Jim Simons Lasts A Whole Hour Without Chain Smoking A Carton Or Two
Submitted by Tyler Durden on 06/23/2009 - 18:41Much 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
Submitted by Tyler Durden on 06/23/2009 - 18:29It 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.
Mass Layoff Events Continue Accelerating
Submitted by Tyler Durden on 06/23/2009 - 18:29It 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
Submitted by Tyler Durden on 06/23/2009 - 18:07Market 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.
Visteon Final Bond Recovery Price: 3 Cents On The Dollar
Submitted by Tyler Durden on 06/23/2009 - 18:07Market 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.
US Trustee In GM Case Throws Up All Over Evercore Fee App; Calls Fee Demand "Staggering" and "Incredible"
Submitted by Tyler Durden on 06/23/2009 - 17:22Finally someone is sticking against the taxpayer rape going on behind the scenes each and every day in bankruptcy court (even if it is paradoxically the government itself), in which taxpayers directly pay Wall Street's investment banks who pretend to facilitate Obama's pet UAW-placating and merely liquidation-delaying projects.
The money shot from the US Trustee's objection below:
Redbook Retail Index Plunges Again
Submitted by Tyler Durden on 06/23/2009 - 16:40In what is surely a shocking turn for the Mainstream Media, today's horrendous Johnson Redbook Index numbers were curiously not noted anywhere. As Zero Hedge believes in not depriving its audience of data points, especially those lacking a green steroid shot, the charts below indicate just much of a lack to the US budget deficit, upcoming consumer subsidies will be for President Obama (and taxpayers).
By way of background:
