Archive - Mar 6, 2009

As expected, the SEC promptly granted an exemption for the ICE to begin guaranteeing CDS. ICE competitor CME Group has not received an SEC exemption and it is not clear how long it would take for the SEC to make a decision on the competitive platform.

Either way, the ICE has said it will begin backing trades in the market as soon as Monday of next week. Farewell basis trade (unless our readers feel otherwise, in which case we welcome their thoughts).

The recent run up in oil prices has resulted in some dramatic shifts along the crude curve. When we first discussed the contango effect (and some amusing risk free ideas as a result), the 12 month spread was roughly $25.

At least according to survivorship bias specialist Hedge Fund Research as quoted by Bloomberg. In all likelihood the real number when factoring in the funds that stopped reporting between January and February is at least double that. HFR states that YTD returns among hedge funds are -0.59%.

Unlike the previous letter, this one actually is worth your time. Kyle Bass, the one man Spartan who took on the Xerxian hordes of sub-prime with his Hayman Capital (which has returned 6% in 2008, 9% in 2009 and is up 340% since inception), and won, shares some very valuable insight. Must Read.

Follows the speech that Vik gave yesterday in the London School of Economics. We post this before an in-depth reading, but at first blush is there a hint in there that Vik wants the elimination of mark-to-market?

An amusing snipped from the speech about Citi's purported invaluable role in the current world, aside from having its shares belonging in 99 cent stores.

Rampant purchasing of protection last week. Net notional positive change (CDS purchasing) of $132 billion this week versus only $8 billion previously. Trading action also ramps up by over 300% with 30,348 contracts traded versus 9,538 last week. Virtually all sectors saw short-risk ramping except consumer services which was the only space with reriskng action.

Rampant purchasing of protection last week. Net notional positive change (CDS purchasing) of $132 billion this week versus only $8 billion previously. Trading action also ramps up by over 300% with 30,348 contracts traded versus 9,538 last week. Virtually all sectors saw short-risk ramping except consumer services which was the only space with reriskng action.

The carrier's long-term corporate credit just cut to BB+ from BBB-. Should do wonders for all those buying aircraft EETFs hand over fist.

The market seems to have sealed the chemical company's fate, essentially saying the likelihood of bankruptcy is about 130% (give or take). Rumors are swirling that Chemtura's destitute bondholders have hired Akin Gump to help them salvage a little of what asset value the plastics maker might have left. With a full blown liquidity crisis and $375 million in notes due this July, the company at this point may at best have another 4 more months of life.

Just hit Bloomberg: JPMorgan denies it published a report Italy is likely to default which is what Italian newspaper La Reppublica had claimed earlier.... well, you know what they say about denial. CDS at 198-203...

S&P just announced it was downgrading Camden Property Trust and First Industrial, and putting nine other REITs on downgrade review including AIV, BRE, Capital Automotive, CLP, DDR, HPT, PLD and UDR...

• Welcome president Obama: market down 20% since inauguration (Bloomberg)
• European CDS blow out: iTraxx at 1,170 bps all time wide (FTAlphaville)
• Bankrupt copper miner Asarco looks set to be acquired by Vedanta (WSJ)
• Merrill discloses its own Jerome
  

12.5 million people unemployed. 731k people have given up looking for work.

Nonfarm payrolls -651k.

Huge downward January payroll revisions: -655k versus prior indicated at -598k.

4.4 million jobs lost since December 2007.

Apparently a downward surprise of 0.2% in unemployment was terrific based on futures.