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Daily Credit Summary: November 9 - Yankee Pride on Dollar Slide
Spreads were notably firm today, with HY outperforming IG, as markets gapped tighter at the open, were unable to recover Friday's tights and leaked tighter all day following the risk-on dollar down trend 'trade-du-mois'. A day of little real news but a continued sell USD, buy anything USD-based saw stocks gapping up to almost 2009 highs on almost 2009 low volumes and we suspect credit's rallies were helped by fund unwinds after Friday's loan BWIC.IG has now traded within a 20bps range (115bps to 95bps) since 7/23 (on an adjusted basis) while equities have continued to move higher with 'buy-the-dips' working incessantly on lower and lower volumes.
Cash new issuance was busy with most coming at decent concessions while the basis remains narrow (relative to the last twelve months or so). We also note the appearance of a CLO primer from one of the bigger dealers - will we really see a re-apperance of the new issue securitization market following today's GS TALF deal (if so look for inflation, TSY steepening, and corporate flattening).
Across our broader CDS universe, we saw six tighteners for every widener but no real relative outperformance in the lower quality higher beta names. In fact the worst performers were in the AA/AA- space with the rest of the universe almost consistently rerisked today. Unlike the more limited IG13 universe, we note Consumer Cyclicals have the best relative performance in CDS today with HomeBuilders (see our exit today) and Apparel best followed by Retailing and Autos. Finance names were the second best performing board sector with Banks beating REITs though both were tighter as we saw CMBX prices nudge higher.
Healthcare, Utilities, and Capital Goods saw the worst performance of the day (though on average tighter) as any safety trade was lifted for the moment. Construction machinery (Cap Goods), Pipelines (Energy), and Software (Tech) were the only industries to see net spread decompression. Restaurants, Labs, and Pharma were also amount the weakest industries as we saw Gaming, Lodging, Publishing, and Mining all improve notably.
The price of investment grade credit rose 0.2% to around 100.07% of par, while the price of high yield credits rose 1% to around 93.5% of par. ABX market prices are higher (improving) by 0.44% of par or in absolute terms, 1.65%. Broadly speaking, CMBX market prices are higher (improving) by 0.67% of par or in absolute terms, 0.21%.
Commentary courtesy of www.creditresearch.com
Index/Intrinsics Changes
CDR LQD 50 NAIG -2.69bps to 87.07 (3 wider - 40 tighter <> 31 steeper - 18 flatter).
CDX13 IG -4.51bps to 98.375 ($0.2 to $100.07) (FV -2.16bps to 103.61) (14 wider - 95 tighter <> 70 steeper - 52 flatter) - Trend Tighter.
CDX13 HVOL -3.07bps to 185 (FV -4bps to 187.26) (4 wider - 21 tighter <> 17 steeper - 11 flatter) - Trend Tighter.
CDX13 ExHVOL -4.96bps to 71.02 (FV -1.6bps to 78.01) (10 wider - 85 tighter <> 42 steeper - 53 flatter).
CDX13 HY (30% recovery) Px $+1 to $93.5 / -28.6bps to 674.3 (FV -11.62bps to 626.47) (12 wider - 85 tighter <> 62 steeper - 37 flatter) - Trend Tighter.
ITRX12 Main -3.43bps to 84 (FV -1.75bps to 83.71) (4 wider - 120 tighter <> 35 steeper - 89 flatter) - Trend Tighter
ITRX12 HiVol -6.5bps to 137 (FV -2.99bps to 134.58) (0 wider - 30 tighter <> 10 steeper - 20 flatter) - Trend Tighter
ITRX12 LoVol -2.46bps to 67.26 (FV -1.37bps to 67.99) (4 wider - 91 tighter <> 70 steeper - 25 flatter) - Sideways Trading
ITRX12 XOver -19.5bps to 510.88 (FV -17.66bps to 526.11) (1 wider - 44 tighter <> 24 steeper - 21 flatter) - Trend Tighter
LCDX12 (65% recovery) Px $+0.47 to $98.7 / -15.35bps to 572.35 - Trend Tighter.
MCDX12 +3.5bps to 112bps. - No Trend.
CDR Counterparty Risk Index fell 3.32bps (-3.35%) to 95.68bps (0 wider - 14 tighter).
CDR Government Risk Index rose 0.45bps (0.91%) to 49.27bps..
DXY weakened 1.02% to 75.05.
Oil rose $1.86 to $79.29.
Gold rose $8.8 to $1103.9.
VIX fell 1.04pts to 23.15%.
10Y US Treasury yields fell 1.9bps to 3.48%.
S&P500 Futures gained 2.39% to 1091.7.
Single-Name Movers
Today's biggest absolute movers in IG were Altria Group Inc (+4.5bps), Constellation Energy Group Inc. (+4.25bps), and Cigna Corp (+3bps) in the wideners, and International Lease Finance Corp. (-19.93bps), Metlife, Inc. (-18.75bps), and Hartford Financial Services Group (-11.25bps) in the tighteners. Today's biggest percentage movers in IG were Campbell Soup Company (+11.76%), Altria Group Inc (+4.35%), and General Mills Inc. (+2.53%) in the wideners, and Kraft Foods Inc. (-8.82%), Wells Fargo & Company (-7.66%), and Metlife, Inc. (-7.25%) in the tighteners.
In the more financial-heavy CDR NAIG LQD 50 index, sentiment is bullish with 3 wider to 40 tighter, and 31 steeper to 18 flatter as 1 of the 50 credits have inverted curves. The biggest absolute movers were Campbell Soup Company (+3bps), Ryder System Inc. (+2.5bps), and Conagra Foods Inc (+0.69bps) in the wideners, and Wells Fargo & Company (-8.5bps), Bank of America Corp. (-8bps), and Kraft Foods Inc. (-7.75bps) in the tighteners. The biggest percentage movers in the CDR NAIG LQD 50 were Campbell Soup Company (+11.76%), Ryder System Inc. (+2%), and Conagra Foods Inc (+1.57%) in the wideners, and Kraft Foods Inc. (-9.09%), Wells Fargo & Company (-7.66%), and JP Morgan Chase & Co. (-6.98%) in the tighteners.
In the names of the HY index, today's biggest percentage movers were Intelsat Ltd (+36.2%), CIT Group Inc (+2.45%), and DISH DBS Corporation (+1.57%) in the wideners, and Clear Channel Communications Inc (-11.08%), Limited Brands, Inc. (-6.25%), and Boyd Gaming Corporation (-5.61%) in the tighteners. The largest absolute movers in HY were Intelsat Ltd (+143.79bps), CIT Group Inc (+40.44bps), and Radian Group Inc (+20.31bps) in the wideners, and Clear Channel Communications Inc (-271.61bps), Energy Future Holdings Corp. (-91.84bps), and Freescale Semiconductor, Inc. (-69.33bps) in the tighteners.
The CDR Counterparty Risk Index Series 2 (of brokers and banks) fell -3.32bps (or -3.35%) to 95.68bps. HSBC Bank PLC (-0.57bps) is the worst (absolute) performer among the banks/brokers of the CDR Counterparty Index, whilst Royal Bank of Scotland Group Plc (-0.74%) is the worst (relative) performer. Merrill Lynch & Co., Inc. (-9bps) is the best (absolute) performer among the banks/brokers of the CDR Counterparty Index, and JP Morgan Chase & Co. (-6.98%) is the best (relative) performer.
Today's biggest absolute movers in Main were Henkel KGaA (+1.97bps), Koninklijke DSM N.V. (+0.41bps), and Bank of Scotland plc (+0.37bps) in the wideners, and Volvo AB (-10bps), ArcelorMittal (-6.96bps), and Accor SA (-6.58bps) in the tighteners. Today's biggest percentage movers in Main were Henkel KGaA (+3.28%), Koninklijke DSM N.V. (+0.84%), and Bank of Scotland plc (+0.31%) in the wideners, and Cadbury Holdings Limited (-8.48%), Allianz SE (-5.33%), and Assicurazioni Generali SpA (-5%) in the tighteners.
In the names of the XOver index, today's biggest percentage movers were DSG International plc (+9.08%), Wendel SA (+0%), and British Airways Plc (-0.5%) in the wideners, and Gecina SA (-13.58%), NXP b.v. (-12.34%), and Seat Pagine Gialle SpA (-10.63%) in the tighteners. The largest absolute movers in XOver were DSG International plc (+78.2bps), Wendel SA (+0bps), and Deutsche Lufthansa AG (-1.91bps) in the wideners, and NXP b.v. (-241.09bps), Seat Pagine Gialle SpA (-203.7bps), and Ineos Group Holdings plc (-116.25bps) in the tighteners.
The CDR Aussie Index fell -1.75bps (or -2.09%) to 81.97bps. Macquarie Bank Limited (1.03bps) is the worst (absolute) performer, whilst Commonwealth Bank of Australia (1.2%) is the worst (relative) performer. RIO Tinto Ltd (-11.94bps) is the best (absolute) performer, and RIO Tinto Ltd (-11.38%) is the best (relative) performer.
The CDR Asian Index fell -0.63bps (or -0.55%) to 112.7bps. Promise Co Ltd (41.04bps) is the worst (absolute) performer, whilst Sumitomo Mitsui Banking Corp (11.36%) is the worst (relative) performer. Acom Co Ltd (-37.5bps) is the best (absolute) performer, and SK Energy Co., Ltd. (-8.63%) is the best (relative) performer.
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and now the bullish case from Wharton's Siegel (he disagrees with Rosie)
http://www.bloomberg.com/avp/avp.htm?N=av&T=Wharton%20School%27s%20Siege...
Seigel's rationale for his predicitons appears to be the concensus economists
job growth in Q1 2010 and a H1 2010 GDP of 4 to 5% and a Fed rate increase in H1 2010
he likes the productivity metric (the greatest in 40 years)
lots of legs to this Bull Market at least 10% more in calendar 2009
10 year heading to 4% and dollar will continue to weaken (thus a rate increase)
deficit will not be a problem because of economic growth that is expected (not becasue of excessive spending by Obama)
trade deficit continues to narrow
concerned about Oil >70
anynon says: has it occured to some of these experts that the so called cost cutting has been a function of year over year significantly lower raw material, enegry and credit costs while top line revenue has remained stable????
Siegel reminds me of the retired generals that the Pentagon trotted out for the media in advance of Iraq
and here's a clip of Siegel and David Tice from Feb 2008 (pre Bear) - Siegel's big concern inflation -
http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/ca...
To 125262:
I attended Wharton and graduated in '03. J.Siegel is a brilliant man, but his argument lies not on his intelligence, but rather his legacy. His book, and the entire efficient market hypothesis is on trial. As many have pointed out, it's easy to make the case, "Stocks for the Long Run" after a 20-25 year run up. Based on the last decade, there is an enormous vote of "no confidence" with two stock bubble bursts, and if you count real estate and the price of oil, at least 4 asset bubble bursts. I like J.Siegel as a friend, but his argument is disengenous at best and intellectually fraudulent at worst.
Seigal is a senile, "been bullish for about a 1000 years", dope. See his May 2000 call- buy, buy, buy!!
He owns a stake in WisdomTree Investments , a sponsor of ETF's and acts as an advisor for the company. He is always talking his own book. Of which he has published many. All bullish, all buy, buy, buy!
Material costs have rocketed since the bottom (copper up what almost 300%, crude up 140%) Nothing will kill what minor recovery may or may not be occurring like $100.00 crude.
Revenue for the S&P 500 (to date) were down about 12% q3 2009 y/y. remember we were in recession in q3 2008 and we are suppossed to be out of one now.
Finally one wonders if Jermey has noticed as many lay-offs as i have over the past 10 days? It started with JnJ and continued through to S today.
Of course JPM said they were going to hire 350 bankers to make consumer and small biz loans. Which contradicts what their CEO of Retail Financial Services said at a conference last week. He expects consumer loans to shrink by about 10-15% next year. Semantics perhaps?
If you are going to post about a bull, find one with more credibility than Jeremy.
I found this bull - not sure about his credibility though
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCyPFlcZdck8&pos=2
Lizzy, I would really like to hear what other companies you know of that are laying off people. To me this feels like nail in the coffin time for most firms, as discretionary spending continues in its malaise.
When I looked up Sprint, I found a PC World article that says they plan to lay off up to 2500 by the end of the year. This was expected to save the company $350MM a year on labor costs. This makes for $140K expenditure per employee. They must be getting rid of a lot of the brass to make the expenditures that high. Linky:
http://www.pcworld.com/businesscenter/article/181784/sprint_to_lay_off_m...
Hmmm, spreads haven't moved much since July, huh?
That is going to be a problem, since many, many banks and insurance companies have booked "revenues" by marking up their inventory (and almost every insurance company I know now counts their entire bond inventory as available for sale and thus eligible for mark to market).
Bernanke needs to start buying corporates directly, maybe get negative spreads to the curve, to keep the charade going.
Nice pinocchio on lqd weekly.
there you go, look at the move in LQD from 6/30 to 9/30, that juiced a lot of income statements.
now look at 9/30 to today. no real move.
these insurers are going to need to actually generate premium income growth, which is going to be tough, since premium income has been shrinking for most of them.
it really sucks to depend on the American middle class for revenue.
of course, all that means is their p/e ratios will go higher.
I am a 25 year old investor and a student of the Austrian school of economics. I would have held onto allot more stocks beond break even if I knew they would go up for NO FUCKING REASON !!
"I'm ...a student of the Austrian school of economics"
Whazzat? Sorry No Spika D'Inglaysey.
We don't need no stinkin Austrian school of economics.
Roun' here, we usin' the Morphing Bubble School of eCONomics.
A Bubble, here
Then A Bubble, there.
An' Toil & Trouble Everywhere.
nice to see the daily credit summary back.you've been missed.