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Loans Versus Bonds Relative Value: Week of August 6

Tyler Durden's picture





 

It's official: irrational exuberance in the secondary market is back. Indicative loans are now at just over 400 bps while bonds are less than double that at 761 bps. Of course, everyone at this point has forgotten the expectation of 20% defaults in HY names by the end of 2009. All shall be well in 5x+ leveraged consumer names wich make mattresses. Not sure if the Sealy loans trading 450 bps outside of bonds is real or not, but who really cares: the bond squeeze could easily push it so tight you would have to pay the company to hold their CCC-rated toxic paper.

Next week: look for loans to trade as wide as US CDS, with bonds squeezed to nano bps over zero.

 


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Wed, 08/12/2009 - 09:43 | Link to Comment Anonymous
Wed, 08/12/2009 - 09:52 | Link to Comment B_Movie
B_Movie's picture

so much for yesterdays trading under last months high, a strong reaction to get back above that montly level.

what a powerful daily bar already painted. good lord,

Wed, 08/12/2009 - 09:53 | Link to Comment Anonymous
Wed, 08/12/2009 - 10:10 | Link to Comment Anonymous
Wed, 08/12/2009 - 10:29 | Link to Comment dnarby
dnarby's picture

OK, you painted an eloquent picture, if you would, please put it in a frame.  Why is there going to be voracious demand for debt down the line?

Wed, 08/12/2009 - 11:39 | Link to Comment Anonymous
Wed, 08/12/2009 - 16:21 | Link to Comment Gilgamesh
Gilgamesh's picture

Select Comfort is the next BoA?

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