Archive - Mar 4, 2009

The Federal Reserve Board has approved the proposal of Atlanta-based Intercontinental Exchange (ICE) to be CDS clearinghouse. The SEC is expected to follow promptly in its approval as well. As counterparty risk is thus set to be eliminated, CDS spreads will likely widen dramatically and the CDS basis trade will collapse over the next few months as CDS and bond spread converge.

Matlin Patterson's pet investment banking project Broadpoint announced it was acquiring another boutique investment bank, Gleacher Partners, for $67 million, consisting of $20 million in cash and $47 million in stock, and will henceforth be known as Broadpoint Gleacher.

UBS announced today it is refusing to comply with the I.R.S,' demand that it turn over the names of tax evaders who had used the Swiss Banks' services. The U.S. earlier filed a lawsuit seeking to force UBS to disclose the names of 52,000 people who had major problems with accessing the help feature in TurboTax.

First General Electric, now BRK. Berkshire Hathaway CDS not helping market today... The implied risk of Warren Buffett's derivatives bet and his 2008 losses have pushed BRK 5 year CDS to an all time wide today, offered at 540bps after closing at 510 yesterday. Indicatively the IG11 index of investment grade names is currently at 244bps, implying the market views BRK's AAA rating a little more like BB (or the investment grade universe is massively mispriced).

Ray Dalio's phenomenal track record has finally caught up with him, as his Bridgewater Associates is now the world's largest hedge fund measured by assets under management.

Ray Dalio's phenomenal track record has finally caught up with him, as his Bridgewater Associates is now the world's largest hedge fund measured by assets under management.

Many hopes and dreams reside with what so far has been the best accepted (at least by Wall Street's conventional wisdom) government program - the Term Asset-Backed Securities Loan Facility, aka TALF, aka Prime Broker Of The People, By The People, For The People. But as we have seen before (TARP 1, TARP 2, Tim Geithner) it is usually only a matter of time before those who read (instead of just repeating the talking heads) scratch the surface and sniff between the lines.

In adhering to its strict philosophy of throwing out all babies with the bathwater and never believing in fundamental analysis, and also continuing with its recent mass downgrades of all the assets it had been pumping for ages, Moody's earlier came out with a bomb on an announcement saying it has put essentially all CLO tranches on downgrade review.

In adhering to its strict philosophy of throwing out all babies with the bathwater and never believing in fundamental analysis, and also continuing with its recent mass downgrades of all the assets it had been pumping for ages, Moody's earlier came out with a bomb on an announcement saying it has put essentially all CLO tranches on downgrade review.

Surprising miss Kary did not break this one (maybe former Goldman restructuring honcho now K&E restructuring honcho Jaime Sprayregen finally "plugged" his leak), instead this piece of news comes compliments of Debtwire. According to "two sources familiar with the situation" Chemtura has hired Kirkland & Ellis as legal counsel and Lazard as financial advisor.

As the market is running on fumes based on some doctored Chinese data, GE keeps probing new depths, hitting another record low of $6.36 at last check. The major concern plaguing the AAA-rated conglomerate today (whose CDS trades at distressed debt levels of about 20 points upfront) has to do exactly with its credit rating. According to a Fortune report, there is a sword of Damocles hanging over GE's head, in the form of a rating agency downgrade.

The search for safe spots in the market rout so far this year has resulted in some curious hiding places. The big rotation out of equities in the end of 2009 and into credit has accelerated, and while IG initially was considered the frontrunner for the safe credit category, it is surprisingly junk debt that has emerged as the best performing sector of 2009.

• GE CDS trades at 19 points
• ADP unemployment increases by 697k, 70k more than expected "priced in" (Bloomberg)
• MGM says it may breach covenants soon (Bloomberg)
  

• New $60 billion treasury sale on deck (Bloomberg)
• The unemployment breadth of the recession (NYT)
• Junk bond borrowers line up (WSJ)
• China announcing new stimlus plan, 3 months after last (Blo
  

From the every vigilant and never counterpartied Goldman Sachs