Frontrunning: June 24
Submitted by Tyler Durden on 06/27/2009 - 15:43The Relationship Between Bonds And CDS Spreads
Submitted by Tyler Durden on 06/27/2009 - 15:33As 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 06/27/2009 - 15:32Second Budget Hotel Bankruptcy In One Week, CRE Getting Monkeyhammered
Submitted by Tyler Durden on 06/27/2009 - 15:30First 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. The company, which owns 210 hotels, defaulted on $367 million of mortgage debt, has a total of $1.2 billion in total debt, including mezz loans and other notes. The company was purchased a mere 2 years ago by Citigroup (yep, the same phenomenal deal makers who wouldn't know how to find their gluteus maximum with a magnifying glass, bought a 79% stake in yet another toxic piece of garbage) from Accor SA for $1.3 billion.
What Is Spooking Auto Supplier CDS?
Submitted by Tyler Durden on 06/27/2009 - 15:27Or 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 - June 23
Submitted by Tyler Durden on 06/27/2009 - 15:25Strange 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. 2s10s gyrated wildly after the $40 billion 2 year auction which cleared at a 1.151% yield vs. a 1.202% expected, and closed practically unchanged.
Daily Credit Summary: June 23 - Narrow Ranges
Submitted by Tyler Durden on 06/27/2009 - 15:20Spreads 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). Indices generally outperformed intrinsics (with curves flattening and rolls decompressing as unwinds seem the theme of the week) with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.
Jim Simons Lasts A Whole Hour Without Chain Smoking A Carton Or Two
Submitted by Tyler Durden on 06/27/2009 - 15:19Much 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 06/27/2009 - 15:16
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...
Visteon Final Bond Recovery Price: 3 Cents On The Dollar
Submitted by Tyler Durden on 06/27/2009 - 15:12Market 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. And if there was a way to grade the test, it would be an emphatic F: not so much for bankrupt Visteon which is already in the morgue, but for other comparable auto suppliers whose bonds and loans recently have seen overambitious PMs buying their debt as if every single credit instrument would be rolled into Taxpayer Capital LLC's Worthless Assets Fund.
US Trustee In GM Case Throws Up All Over Evercore Fee App; Calls Fee Demand "Staggering" and "Incredible"
Submitted by Tyler Durden on 06/27/2009 - 15:10Finally 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.
Redbook Retail Index Plunges Again
Submitted by Tyler Durden on 06/27/2009 - 14:57
In 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).
Intraday Charting
Submitted by Tyler Durden on 06/27/2009 - 14:51
As Obama speaks and investors recall what it was like to short the market at every TV appearance of the president, the dollar is getting pillaged: the DXY just dropped below the 80 support level after Europe has said it will start tightening soon.
Whalen And Griffin On OTC Derivatives
Submitted by Tyler Durden on 06/27/2009 - 14:47From yesterday's hearing before the U.S. Senate on Over The Counter Derivatives. The full archived webcast can be found here - some perspectives from Citadel's Griffin and Robert Pickel, CEO of ISDA, but most notably a very exhaustive report from Chris Whalen of IRR. While I am not as much a proponent of regulation of CDS as Whalen is, he provides an impressive narrative of recent events which, if one were so inclined, could provide CDS-haters enough ammo to make a sufficiently strong case.
More Bad News For Boeing: Sea Launch Files For Bankruptcy
Submitted by Tyler Durden on 06/27/2009 - 14:43Commercial satellite-launch services provider Sea Launch, which is 40% owned by 787 on time manufacturer extraordinaire, Boeing, filed for bankruptcy last night in Delaware (09-12513). The Long Beach company which has used the Kazakhstan Baikonur Space Center for rocket launches in the past, has listed liabilities of over $1 billion.
