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Daily Credit Summary: September 24 - Jobs And Homes
Spreads widened for the second day in a row, as weaker than expected existing home sales trumped a headline beat for initial claims swinging risk assets from a good start to a weak middle. Stocks drifted further down most of the day except for a late day cover rally (for the daytraders) which credit hardly took part in as IG went out near its wides and SPY dropped close to its low after-hours as RIMM lowered its Q3 revenue outlook (so much for top-line growth coming to the rescue).
IG seemed comfortable going wider as IG12 held solidly above 100bps (and Main11 above 80bps) with IG13 closing at its widest (we know its only 4 days) and we saw modest roll decompression in IG12-13 as the remnants in the tails of IG12 underperformed for a change (CIT for example) with AIG and ILFC also wider (is this the end of the tranche unwinds? - certainly big enough moves today to warrant that perspective after the crushing recently).
Spreads were weaker across the board in the major indices today with ExHVOL underperforming and HY outperforming (as it clung to the 600-625bps range). IG trades only 9.5bps tight (rich) to its 50d moving average, which is a Z-Score of -1.2s.d. At 104.63bps, IG has closed tighter on only 7 days so far this year (191 trading days) but is at its widest close since 9/14. The last five days have seen IG flat to its 50d moving average.
Indices generally outperformed intrinsics (as the compression in high beta names has abated for a day or two) with skews widening in general as IG's skew widened as it underperformed, HVOL outperformed but narrowed the skew, ExHVOL's skew widened as it underperformed, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.
The names having the largest impact on IG are Simon Property Group, L.P. (-10.5bps) pushing IG 0.08bps tighter, and CIT Group Inc (+127.22bps) adding 0.61bps to IG. HVOL is more sensitive with Simon Property Group, L.P. pushing it 0.35bps tighter, and CIT Group Inc contributing 2.65bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Avnet Inc. (-6bps) pushing the index 0.06bps tighter, and Canadian Natural Resources Limited (+11bps) adding 0.11bps to ExHVOL.
The price of investment grade credit fell 0.16% to around 99.81% of par, while the price of high yield credits fell 0.1925% to around 94.94% of par. ABX market prices are lower by 0.58% of par or in absolute terms, 1.66%. Broadly speaking, CMBX market prices are unch to lower. Volatility (VIX) is up 1.46pts to 24.95%, with 10Y TSY rallying (yield falling) 4.3bps to 3.38% and the 2s10s curve flattened by 1.2bps, as the cost of protection on US Treasuries fell 0.25bps to 21bps. 2Y swap spreads tightened 1bps to 29.31bps, as the TED Spread widened by 0.3bps to 0.2% and Libor-OIS deteriorated 0bps to 11.1bps.
The Dollar strengthened with DXY rising 1.11% to 76.893, Oil falling $2.89 to $66.08 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 2.8% today (a 3.08% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $14.4 to $994 as the S&P is down (1044.5 -1.36%) underperforming IG credits (104.63bps -0.16%) while IG, which opened wider at 101.75bps, outperforms HY credits. IG11 and XOver11 are 0bps and +10.75bps respectively while ITRX11 is +3.38bps to 83.63bps.
Dispersion rose +11.7bps in IG for the first time in over a week. Broad market dispersion is in line with historical expectations given current spread levels, showing investors fairly well balanced, with dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.
Only 22% of IG credits are shifting by more than 3bps and 42% of the CDX universe are also shifting significantly (less than the 5 day average of 47%). The number of names wider than the index decreased by 4 to 38 as the day's range rose to 7.25bps (one-week average 5.75bps), between low bid at 97.75 and high offer at 105 and higher beta credits (0.33%) outperformed lower beta credits (0.75%).
In IG, wideners outpaced tighteners by around 2-to-1, with 57 credits notably wider. By sector, CONS saw 57% names wider, ENRGs 56% names wider, FINLs 48% names wider, INDUs 43% names wider, and TMTs 22% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 86.79bps and the latter at 76.85bps.
Cross Market, we are seeing the HY-XOver spread decompressing to 158.15bps from 149.88bps, but remains above the short-term average of 137.21bps, with the HY/XOver ratio rising to 1.33x, above its 5-day mean of 1.27x. The IG-Main spread decompressed to 21bps from 20.38bps, but remains above the short-term average of 17.72bps, with the IG/Main ratio falling to 1.25x, above its 5-day mean of 1.21x.
In the US, non-financials outperformed financials as IG ExFINLs are wider by 0.4bps to 76.9bps, with 37 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 1.64bps to 92.68bps, with Brokers (worst) wider by 4.67bps to 121.33bps, Finance names (best) wider by 21.3bps to 616.54bps, and Banks wider by 3.82bps to 122.04bps. Monolines are trading wider on average by 204.53bps (5.47%) to 3128.16bps.
In IG, FINLs underperformed non-FINLs (3.05% wider to 0.55% wider respectively), with the former (IG FINLs) wider by 6.4bps to 216.2bps, with 7 of the 21 names tighter. The IG CDS market (as per CDX) is 22.5bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (82.17bps), with the bond ETFs outperforming the IG CDS market by around 2.91bps.
In Europe, ITRX Main ex-FINLs (underperforming FINLs) widened 4.23bps to 86.79bps (with ITRX FINLs -trending tighter- better by 0 to 71bps) and is currently trading in the middle of the week's range at 67.79%, between 88.8 to 82.56bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading in the middle of the week's range at 73.29%, between 65.1 to 58.49bps. ExHVOL underperformed LoVOL as the differential decompressed to 7.52bps from 6.1bps, but remains above the short-term average of 2.74bps. The Main exFINLS to IG ExHVOL differential compressed to 15.94bps from 16.97bps, but remains below the short-term average of 20.6bps.
Commentary compliments of www.creditresearch.com
Index/Intrinsics Changes
CDR LQD 50 NAIG +0.59bps to 76.5 (20 wider - 15 tighter <> 19 steeper - 29 flatter).
CDX13 IG +3bps to 96 ($0.19 to $100.17) (FV +0.76bps to 89.84) (54 wider - 40 tighter <> 58 steeper - 62 flatter) - Trend Tighter.
CDX13 HVOL +3bps to 180 (FV +1.61bps to 169.51) (11 wider - 12 tighter <> 15 steeper - 14 flatter) - Trend Tighter.
CDX13 ExHVOL +3bps to 69.47 (FV +0.49bps to 65.41) (43 wider - 52 tighter <> 52 steeper - 43 flatter).
CDX12 IG +3.87bps to 104.5 ($-0.16 to $99.81) (FV +1.53bps to 99.67) (56 wider - 38 tighter <> 56 steeper - 64 flatter) - No Trend.
CDX12 HVOL 0bps to 211.6 (FV +4.92bps to 209.03) (13 wider - 11 tighter <> 14 steeper - 16 flatter) - Trend Tighter.
CDX12 ExHVOL +5.09bps to 70.68 (FV +0.51bps to 66.79) (43 wider - 52 tighter <> 53 steeper - 42 flatter).
CDX12 HY (30% recovery) Px $-0.19 to $94.9375 / +5.3bps to 634.1 (FV +6.94bps to 559.23) (61 wider - 26 tighter <> 21 steeper - 72 flatter) - Trend Tighter.
CDX13 HY (30% recovery) (FV +7.2bps to 577.38) (66 wider - 27 tighter <> 22 steeper - 77 flatter)
LCDX12 (65% recovery) Px $+0.05 to $98.8 / -1.53bps to 536.49 - Trend Tighter.
MCDX12 +2bps to 93bps. - No Trend.
CDR Counterparty Risk Index rose 1.12bps (1.23%) to 92.16bps (8 wider - 6 tighter).
CDR Government Risk Index rose 0.42bps (1.01%) to 41.96bps..
DXY strengthened 1.11% to 76.89.
Oil fell $2.89 to $66.08.
Gold fell $14.4 to $994.
VIX increased 1.46pts to 24.95%.
10Y US Treasury yields fell 4.1bps to 3.38%.
S&P500 Futures lost 1.36% to 1044.5.
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Don't need no stinkin' Blackberry. I'm just not that important.
Full Blackberry functionality is achieved with the correct data plan from your service provider.
You can have a Blackberry that is crippled and only provides cell service. If this is all you need then it would be wise to get the Blackberry with this cell plan. You will look important, your life will improve with a better job, sexier girlfriends, faster horses and such.
If you stick with your ghetto phone you'll never get any respect from the ZH crew. Please carefully consider your role as a consumer.
Funny, I was looking for corporate credit today and every bond I looked at seemed to be trading tighter... although I only work with a few issues that I feel confident in. Hrmm, wonder what was wider then.
sounds like you are buying from retail inventory where anything goes and where levels are not indicative of the actual institutional mkk which is what is quoted here. Also, I'm not sure how much you know about bonds, so forgive me if I insult you, but the prices on everything was higher yest due to treasuries beoing higher. That has nothing to do with spread to tresuries which was in fact wider. meaning that credit underperformed UST.
Chris Martenson explains it all:
http://www.chrismartenson.com/blog/decoding-fed/28177
I spent about 20 minutes this afternoon on a conference call with #1 Floor Trader. He confirmed October 12. His exact words were "I'm looking for a disruption to this bull run in mid-October".
The email that we intercepted specifically stated October 12th as "an acceleration point for the sell-off".
Do what you will with this information.
I will do nothing with that information sir; keep it to yourself.
Do you know who he likes for the 3rd race at Hialeah today?
Wow, #1 Floor Trader! Ichiban! You can't do better than a second hand tip from Anonymous' keyboard right to your eyes, from anonymous Ichiban #1 Floor trader. You just can't.
TD, I'm surprised you haven't picked up on the WSJ story about the Perot inside trader. You made mention of this a couple of weeks ago, right? Same guy you think?