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More On The CMBX Wipe Out Courtesy Of The Federal Reserve
From Peter Tchir of TF Market Advisors
More On The CMBX Wipe Out Courtesy Of The Federal Reserve (and our own observations on credit saturation here)
Well, the problems in CMBX are finally hitting some of the mainstream media. We first pointed out the problems in CMBX last Thursday. HYG is down just over 1% since then. We highlighted the CMBX and ABX problems again on Tuesday. Since then HYG is only down a little bit, but as we suggested at the time, it has now underperformed stocks. It moved 1:1 with stocks on Wednesday and was only up marginally yesterday in spite of a decent size stock gain.
I am not sure what it means that there were two Bloomberg articles today talking about CMBS market and how it has impacted the rest of the credit market. CNBC just mentioned CMBX. How long has it been since they mentioned CMBX? I suspect it has been awhile. This could be a sign that the problem has played out. It isn't new news to people focused on credit markets. My only hope as someone who is still a little bearish, is that if we do get another round of weakness, the CMBX boogey man will encourage some people who typically don't play in credit, to buy some CDS or even sell financial stocks, which would be good for the short.
Yesterday's rally was encouraging for the market. Indices felt weak all morning, in spite of stock strength, but when they turned, they gapped tighter very quickly. The trading looked very choppy. Large volumes would go through at a price on HY16 or IG16, but the index would gap to a new level on very few trades, where it would once again become very liquid. It is a little worrisome when you get moves like that as it is a sign even index market makers don't want to take much risk. It is also a bit surprising that trading pattern is happening after what has really been a fairly small move. HY16 has only moved a couple of points. IG16 has only moved from 89 on May 31st, a 10 bp move in almost 2 weeks, shouldn't be impacting liquidity as much as it seems to be.
It did seem like most people in credit were hoping for and expecting the rally. It did not have the fierce fear of a true short covering capitulation move. It was a grudging rally most of the day, and it doesn't seem like it was enough to truly encourage investors to buy more bonds, but it was enough to ease the selling pressure. With the market more balanced, I'm less bearish, but will continue to watch for another wave of bonds being sold. Yesterday was calming, but in no way fixed the problem of investors and dealers being caught too long, and bond prices still a bit artificially high due to a lack of true liquidity providing by the street. HYG and JNK both saw a very small reduction in shares outstanding. I haven't seen the AMG number yet.
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Surely, you cannot be questioning the integrity of the BlowHorn [CNBC] by suggesting that the network does not act in the interest of the little guy, but instead acts as a corrupt network designed to help criminal syndicate Wall Street banks frontrun folks directly into a dirtnap? Surely, you jest.
It's about time the ABS market cleared, which I believe is why the Fed is approaching it this way. If banks can't afford to have this risk marked after 2 1/2 solid years of the most bank-focused stimulus ever attempted, then they have seriously been asleep at the switch.
Looking forward to having corporate spreads widen as well.
cbxs,hg50s,hygs,cds,derivatives, blah blah blah good lord no wonder this planet is a huge shithole. Why do we need all this crap? It's all going to hell so don't bother explaing that.
What? "CBXS" is crap? I beg to differ.
We need such things desperately so that you have no idea what is going on in the financial world, and thusly watching all of the financial services adverts on the BlowHorn [CNBC], find yourself in need of hiring a financial services firm to grossly misallocate your capital into things like Netflix which, if you have not heard, is the key to free market capitalism here in the free world.
Without "CBXS", the BlowHorn and the entire financial services industry would not have any work to do, and the second largest S&P sector by market cap would suddenly find itself bidless. And we cannot have this group of people being laid off because that would hurt the shares of Tiffany & Co.
"CBXS" is crucial to the survival of the syndicate and hence the free world.
Cdad...that is funny shit.
Thank You!
No problem. Just trying to do my part to help people understand the real problem hiding in plain sight...that being an entirely corrupt criminal syndicate of Wall Street TBTF banks that are thwarting any chance for real capital formation in America, and therefore any chance for real economic recovery.
You should really stick to watching american idol.
I liked when Jamie Dimon went through the list of products the street 'no longer' does. Asides from the fact that they still trade and try and create those products, the volumes haven't dropped because the banks have voluntarily pulled back, the volumes have dropped because in spite of banks' efforts clients don't want complexity right now. Though it is making a comeback as the chase for yield grows.
Mostly true.
One must remember that, although the street "no longer does" certain types of deals, many had long maturities / expiries and so are out there still requiring marking, risk management, etc.
I do think it's too much to say that the banks want to do new deals of this sort and can't find takers. From what I'm seeing, upper management at banks is far more skeptical of products that are known to be "difficult" than other market participants are. So either these deals will be done with limited involvement of the big guys (as fee-collectors rather than market-makers), or new products will take hold that don't look difficult to the managers but are.
2009 is my best guess. The problem is that it is still basically ignored becaust by God that Twitter IPO is more important to indicate the health of the financial system and U.S. economy.
That and a gazillion Weinerjokes.
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