Archive - Apr 15, 2009 - Story

The past week was virtually dead in CDS trading, with a mere $14.6 billion in notional changing hands, however consisting of surprisingly robust 18,776 contracts. The prior week derisking in sovereigns reversed, and last week saw a $24 billion derisking in the space. All other sectors were significantly unchanged, with the exception of consumer services where $11.2 billion in protection was unwound.

In addition to getting a little AMT love on his $2.9 million in gross income last year mostly from Random House book publishers and Dystel and Goderich literary agents (p.

[youtube=http://www.youtube.com/watch?v=axZ8B0veY3Q&color1=0xb1b1b1&color2=0xcfcf...]

hat tip Joe Weisenthal

Some more credit card calamities compliments of Bond View. Unprecedented lows for Washington Mutual's credit card master trust excess spread: a collapse from 4.44% to 1.12% in 1 month, while the loss rate has ballooned to record levels.

April 14th SPY close $84.35; VWAP close: $84.77

April 15th SPY close$85.25; VWAP close: $84.41, lower than prior close.
Note the massive buying spree above $85.20, amounting to 24 million shares, a tenth of the total VWAP volume of 241 million shares.

Spreads were mixed in the US today with IG tighter, HVOL improving, ExHVOL weaker, XO stronger, and HY rallying (with single-names outperforming indices once again on low volumes). Indices typically underperformed single-names with skews widening in general as IG underperformed but narrowed the skew, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

As we head into option expiration on Friday, it is interesting to observe what the implied "attraction" price for certain underlying securities is. For this particular example I have picked the (in) famous SPY. Calculating the put/call equilibrium, indicates that the local minimum for the SPY is at $80, compared with a recent print of the SPY itself around $84. The "equilibrium" price is the point at which the call and put payoffs are the smallest, or net each other out the most.

Some CRE snippets from the report:

"Nonresidential real estate conditions continued to deteriorate. Difficulty obtaining commercial real estate financing was constraining construction and investment activity. Bankers reported tight credit conditions, rising delinquencies, and some deterioration of loan quality.

Commercial real estate investment activity weakened further. Contacts said a decline incredit availability and markdowns on commercial property were keeping buyers and sellers onthe sidelines.

Marty Sullivan is out with an insightful analysis of what the U.S. budget will really look like and what the implications for the future are (here and here). While the conclusions are not very surprising, there are some relevant phrasings.

Aside from padding the pockets of AIG counterparties of course. Ponder this over lunch. The original at www.wallstats.com takes a while to load but makes for a terrific college24" x 36" dorm room poster.

Well, it isn't corporate sponsorship, but readership is a step in the right direction.

Also, 80 points swings in the Dow in a 20 minute interview are likely not an indication of increasing volatility. Especially when contrasted to stable spreads such as GLD/SPY which have solid beta to the market.

Some very ugly credit card charge-off data just out from Capital One.

A lot of secondary criticism levelled at the Fed's policies have revolved around the massive tidal wave of inflation being built up and a fear that it's bound to launch an unforeseeable Weimar-republic style inflationary spiral that will end up putting us down for the count. In the short term, the deflation bugs are out, especially with the recent release of consumer CPI numbers of various vintages.

For the side view on Goldman Sachs.

This is no way to build confidence that you are not headed for bankruptcy. The troubled PVC maker issued a press release earlier stating that it is withholding an interest payment: