Daily Credit Summary: April 9 - Break Your Mortgage, Buy An Electronic Book, Learn To Read

Tyler Durden's picture

Commentary compliments of www.creditresearch.com

Market Summary

Spreads were mixed in the US with IG tighter, HVOL wider, ExHVOL better, and HY rallying. IG trades 7.3bps tight (rich) to its 50d moving average, which is a Z-Score of -0.9s.d.. At 87bps, IG has closed tighter on only 15 days in the last 328 trading days (JAN09). The last five days have seen IG flat to its 50d moving average. Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, HY outperformed but narrowed the skew.

3.2% of names in IG moved more than their historical vol would imply as higher vol names outperformed lower vol names by 1% to 1.08%. IG's vol is around 4.38% per 1 day period, which leaves 95 names higher vol and 30 lower vol than the index.

The names having the largest impact on IG are Vornado Realty LP (-5.25bps) pushing IG 0.04bps tighter, and American International Group, Inc. (+10bps) adding 0.08bps to IG. HVOL is more sensitive with Vornado Realty LP pushing it 0.17bps tighter, and Alcoa Inc. contributing 0.32bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Aetna Inc (-5bps) pushing the index 0.05bps tighter, and Constellation Energy Group Inc. (+7.5bps) adding 0.08bps to ExHVOL.

The price of investment grade credit rose 0.02% to around 100.58% of par, while the price of high yield credits rose 0.31% to around 99.06% of par. ABX market prices are higher (improving) by 0.13% of par or in absolute terms, 0.3%. Volatility (VIX) is down -0.14pts to 16.48%, with 10Y TSY selling off (yield rising) 3.5bps to 3.89% and the 2s10s curve steepened by 1.9bps, as the cost of protection on US Treasuries rose 0.41bps to 42.5bps. 2Y swap spreads tightened 0.4bps to 14bps, as the TED Spread widened by 0.4bps to 0.14% and Libor-OIS improved 0.4bps to 7.9bps.

The Dollar strengthened with DXY rising 0.1% to 81.522, Oil falling $0.33 to $85.55 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 0.49% today (a 0.28% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $1.2 to $1150.55 as the S&P rallies (1183.8 0.41%) outperforming IG credits (87bps 0.02%) while IG, which opened wider at 88.75bps, underperforms HY credits. IG13 and XOver13 are -0.25bps and +3.5bps respectively while ITRX13 is +2.13bps to 81.88bps.

The majority of credit curves steepened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations), and additionally the ratio has dropped below 0.9x which is exceptionally bearish for stocks and spreads.

Dispersion rose +1bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

16% of IG credits are shifting by more than 3bps and 33% of the CDX universe are also shifting significantly (more than the 5 day average of 26%). The number of names wider than the index increased by 1 to 52 as the day's range rose to 4bps (one-week average 2.72bps), between low bid at 86.25 and high offer at 90.25 and higher beta credits (1.49%) underperformed lower beta credits (0.65%).

In IG, wideners outpaced tighteners by around 3-to-1, with 73 credits wider. By sector, CONS saw 47% names wider, ENRGs 76% names wider, FINLs 63% names wider, INDUs 63% names wider, and TMTs 54% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG exFINLs) with the former trading at 78.1bps and the latter at 85.52bps.

Cross Market, we are seeing the HY-XOver spread compressing to 91.09bps from 102.6bps, but remains below the short-term average of 106.04bps, with the HY/XOver ratio falling to 1.21x, below its 5-day mean of 1.25x. The IG-Main spread compressed to 5.12bps from 7.75bps, and remains below the short-term average of 7.26bps, with the IG/Main ratio falling to 1.06x, below its 5-day mean of 1.09x. Among the HY names, we see higher risk names (>500bps) underperforming lower risk (<500bps) names. In the IG names, we see higher beta names underperforming lower beta names.

In the US, non-financials outperformed financials as IG ExFINLs are wider by 1bps to 85.5bps, with 21 of the 106 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 2.67bps to 101.87bps, with Banks (worst) wider by 2bps to 99.17bps, Finance names (best) wider by 1.31bps to 282.23bps, and Brokers wider by 2.42bps to 124.25bps. Monolines are trading tighter on average by -18.37bps (0.22%) to 2558.11bps. In IG, FINLs outperformed non-FINLs (0.84% wider to 1.17% wider respectively), with the former (IG FINLs) wider by 1bps to 125.2bps, with 5 of the 19 names tighter. The IG CDS market (as per CDX) is 23.3bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (63.7bps), with the bond ETFs underperforming the IG CDS market by around 0.36bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) widened 2.1bps to 78.1bps (with ITRX FINLs -trending wider- weaker by 2.25 to 97bps) and is currently trading at the wides of the week's range at 100%, between 78.1 to 73.34bps, and is trading sideways. Main LoVOL (trend wider) is currently trading at the wides of the week's range at 100.04%, between 69.84 to 64.36bps. ExHVOL outperformed LoVOL as the differential compressed to 0.89bps from 4.2bps, and remains below the short-term average of 2.73bps. The Main exFINLS to IG ExHVOL differential decompressed to 7.36bps from 4.45bps, and remains above the short-term average of 6.21bps.

The Emerging Market index is 0.1% riskier (0.2bps wider) to 213.8bps. EM (No Trend) is currently trading at the wides of the week's range at 76.98%, between 215.7 to 207.3bps. The HY-EM spread compressed to 310.33bps from 318.53bps, and remains below the short-term average of 317.53bps, with the HY/EM ratio falling to 2.45x, below its 5-day mean of 2.49x.

Index/Intrinsics Changes

CDR LQD 50 NAIG +1.07bps to 80.35 (33 wider - 5 tighter <> 29 steeper - 20 flatter).
CDX14 IG -0.5bps to 87 ($0.02 to $100.58) (FV +1bps to 91.56) (73 wider - 26 tighter <> 70 steeper - 49 flatter) - No Trend.
CDX14 HVOL +0.5bps to 138.5 (FV +1.64bps to 137.58) (21 wider - 6 tighter <> 19 steeper - 10 flatter) - No Trend.
CDX14 ExHVOL -0.82bps to 70.74 (FV +0.79bps to 77.21) (52 wider - 43 tighter <> 44 steeper - 51 flatter).
CDX14 HY (30% recovery) Px $+0.31 to $99.06 / -8bps to 524.1 (FV +2.22bps to 499.8) (65 wider - 30 tighter <> 58 steeper - 42 flatter) - No Trend.
LCDX12 (65% recovery) Px $+0.38 to $105.75 / -9.63bps to 359.96 - Trend Tighter.
MCDX12 +3bps to 143bps. - No Trend.
CDR Counterparty Risk Index rose 2.67bps (2.69%) to 101.87bps (14 wider - 0 tighter).
CDR Government Risk Index rose 3.06bps (4.08%) to 78.07bps..
DXY strengthened 0.1% to 81.52.
Oil fell $0.33 to $85.55.
Gold rose $1.2 to $1150.55.
VIX fell 0.14pts to 16.48%.
10Y US Treasury yields rose 3.5bps to 3.89%.
S&P500 Futures gained 0.41% to 1183.8.


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Mr Lennon Hendrix's picture

"The Dollar strengthened with DXY rising 0.1% to 81.522."

81.5, where it has been for months now.  I do not care if you recognize who posts what, but SOMEBODY said that this was going to happen.  Somebody said, "The Doelarr will spin its wheels at DXY 81.5 'till the wheels fall off!"  And guess what.........the wheels are about to fall off.  How the hell did he kNWO this?  MAYBE BECAUSE REALITY IS OBVIOUS, AND SO ARE THE LIES!  THE DOELARR IS A LIE!  IT IS NOT BACKED BY ANYTHING!  IT HOLDS NO WEIGHT!  NO POUND!  NO LIRE!  NO LARR!  NO WEIGHT!  THEY JUST SAID IT DID, AND YOU BELIEVED THEM!  WHO GIVES WHAT WYNN STOCK DID?  WHO CARES WHAT COACH STOCK DID?  The numbers ain't nothin'.  CURRENTSEAS ARE VIRTUAL/FICTIONAL.  The DOELARR is the philosopher's stone, and they have told you it is worth its weight.  IT IS NOT!  NO CURRENTSEA IS! 

Question:  So when the EZ erupts into civil war or whatever GS thinks will happen, what will 'Merca do?  Will 'MERCANS need to still be entertained, so will watch from the backround?  This while they starve into submission?  WAKE UP AMERICA!  YOUR TIME HAS COME, AND YOUR KING IS DEAD!  ROLL HIM OVER!  HE AIN'T NAPPING!  THE DOELARR IS DEAD!  PEAK OIL HAS HIT!  AND YOU ARE ALL NEXT!  YOU BETTER MARCH ON WASHINGTON! AND THEN LEARN HOW TO FARM!

The DEOLARR is spinning its wheels in the mud!!  All because the Greasers get upset and 'mercans do not!  This is the greatest staged event I have ever seen.  What if CA stood up like Grease?  Or NY, or Fluorida?  Then the Doelarr would be done in an instant!  Instead, 'Merca keeps drinking the Kool-Aid. 

Well I have news for you 'Merca, when the SHTF, your complacency will make matters worse.  How the hell do you think you are going to live with out cheap oil?  YOU WON'T! 

And this is what it is all about by the way; OIL!  FIGURE IT OUT!

JohnG's picture


You should seriously consider a nice vacation.  Turn off the computer and the TV for a few days and just relax.  The beach perhaps.

I'm completely serious.  You are about to blow a gasket.

Mr Lennon Hendrix's picture

Dear John (haha),

The Shit is about to hit the fan.  Good luck.


SgtShaftoe's picture

You know what terrifies me more than TS hitting the rotating device?  That it doesn't, or more accurately that it does, but it takes 10, god forbid, 20 years to play out.  That is our worst case scenario.  If this slooooowllly collapses in slow motion, all of those that are smart enough to figure it out will have been destroyed, cannibalizing ourselves in the process. 

If the system rips itself apart in a quick rapid destruction, that's fine with me, I can live in that environment, so long as it doesn't take humanity with it (total war).  That just means we can rebuild it better afterward.  I'm fine with that. That would mean we can hold those responsible in a criminal court, and that they won't retire to some banker's row in a far off place.

I fear of suffocation,  a slow bleeding to death, TSHF... we could only be so lucky.


Mr Lennon Hendrix's picture

I agree completely.  Zombieland is my nightmare.

Neo-zero's picture

If the system rips itself apart in a quick rapid destruction, that's fine with me, I can live in that environment, so long as it doesn't take humanity with it (total war).  That just means we can rebuild it better afterward. 


You think you can, maybe you can maybe you can't, but what about all those  who we know can't.  How many will die in riots, revolutions and chaos a scenario like that would mean?  How many children will starve?  How many old people will freeze to death?  

Whose to say that what gets rebuilt will be better.  Yeah we're on a decline, financially, morally, intellectually (brain drain to other countries).  If we fight for our country can we save it or provide a core to rebuild later.  If not will we be known as the generation that threw away the greatest most free nation the world has ever known.

Cammy Le Flage's picture

You are so right....breathe, a little rum and coke or a nice cold beer, some decent music and no t.v.   

Mr Lennon Hendrix's picture

Well, I never watch TV, and I never do coke, but for you guys who care about my cool, I will sip some Makers Mark tonight.  Or Wild Turkey....decisions, decisions.

VegasBD's picture

Do both!

If i watched my alcohol intake i woulda never been able to write this:


Mr Lennon Hendrix's picture

My kind of book.  I live at the library/bookstore so I'll check it out!

Cammy Le Flage's picture

Money is a lie in its current form.  The only value it holds is not even "mark to market".   Humans created money.   We can create something else.   When we figure that out, the only people upset will be the uber-rich who depend on the old barely standing covered in cancerous cysts system because they won't be uber-rich anymore.  This is quite a bit of history to watch - People testifying to Congress that they need to be paid a lot because they are so awesome and smart and also stating that they could not have seen all this coming.  At a regular trial before a jury, such statements would not pass the laugh test.    These really is officially so bad it is funny. 

Mr Lennon Hendrix's picture

"Gold is not money by nature, but money by nature is gold." -Marx

You want to see something crazy?  Silver is capitulating.

Good luck everybody.


Gold...Bitches's picture

sorry, no.  The uber rich have gold, the ultimate currency.  They might have less, but they'll still have more than most others to continue the game anew from a fresh base to work from.

Mr Lennon Hendrix's picture

They do not even use paper.  They laugh at paper.  "Paper?  You mean for the washroom?  BAHAHA!  I am rich, and privileged.  I do not even wipe my own ass!"

Missing_Link's picture

I'd like to second the previous comment recommending that you take a nice vacation.

Slow, deep breaths  ...  maybe an Epsom salt bath  ...

Mr Lennon Hendrix's picture

You guys are right.  This weekend I am buying epsom salt and candles and putting on the Loreena Mckennitt CDs.

Cammy Le Flage's picture

What if gold was not worth anything anymore?  (Don't kill me...just pontificating and thinking out loud....) But, truly - what if?

Mr Lennon Hendrix's picture

I'll bite.

"What if gold was not worth anything anymore?"

Says who?  Central Banksters?

What would the banks hold in reserve?  What would they make as their proprietary trade to start their ponzi scheme?  Gold is the first loan of recourse for banks...

So riddle me this?  How would they start their loan programs?  How could they make their first loan?

Cammy Le Flage's picture

Actually, I not really thinking about financial anything directly....I am thinking about human systems in current and historical form that we are aware of in general on which finances are based.   What if "in general" like any moron on the road knew it....excepting super morons (there are always those) - Gold was not worth anything anymore?  Gold is old money.   New money is on the horizon - it is a completely different system.   Everything circles but we forget the spiral which is evolution.  This is theory of course, but everyone on this site is smart and blunt and honest.   Let's think out of the box.  They did it in France with wine.


What if Gold was not worth anything anymore?

Mr Lennon Hendrix's picture

You lost me with new money....like facebook credits or what?  New paper? 

If I have this correct, you want to tell me that in your new system, in your horizon of virtue, the Doelarr and all currentseas are now worthless, but that is ok because here is a "new currentsea"?  Sounds like the the new boss, same as the old boss.

They did it in Holland with tulips.  That did not work.  They did it in 'Merca with the Doelarr.  Shit is worthless.  Gold is money.  So is silver.  Oil would be too, if we could carry it in our pockets.

Won't Get Fooled Again:


Cammy Le Flage's picture

No, that is not what I am saying.....you are trying to figure out what the new money system is with old money names.  I am thinking solely from logical questioning and there is an unknown.  A BIG one.

Known - Gold is worth nothing.

Unknown - What is worth something in our world as a medium of exchange taking into consideration the "known" fact (above).

I don't know if we (world, human, whatever) have an answer to my question yet?  But, it is a good question to consider I believe.

The song Won't Get Fooled Again is what I am thinking about exactly.  Wow. Prophetic.

for you:  From Jimi,


Mr Lennon Hendrix's picture

Hmmm....well, I do not want it to be virtual, and I do want it to be easily portable, and maintain it's storability indefinitely.  Man, you find it, and tell me, so we can corner the market.  ;)

Cammy Le Flage's picture

What if the answer is plentiful availability so there was no need to corner the market?  Everyone could o.d. on it if they felt the need?

I will let you know if I find it, you might find it first.

-1Delta's picture

I need a beer... bc I cant figure out why Im still short the Euro when I hate the dollar- whetev dont fight the trend, then leverage the turn ;)

Cammy Le Flage's picture

Oh, I guess I must go read a book now.  I am fast.

mtomato2's picture

Behold, the worst article in the history of journalism!


I wrote to his personal e-mail address!  Have fun!