Bond

When a stock goes up by about 10% on a bankruptcy preannouncement, there is nothing much more to be said.

Textron private-jet competitor Hawker Beechcraft was the latest casualty of S&P's ongoing foray into subjective default proclamations, when the rating agency decided to monkeyhammer the company from a B- to a CC rating as a result of Hawker's recent tender offer for its own debt at distressed prices.

Or not. Bill Gross: "Disappointing statement"... Really Bill? One can see the botox losing the fight with the disappointment.

10 Year now at 3.11%

2s10s massively steeper

From Bloomberg:

April 16 (Bloomberg) -- General Motors Corp. is planning to make a formal offer to all bondholders by April 27 to exchange their $27.5 billion in claims for equity, according to a person
with knowledge of the discussions.

GM, facing a June 1 U.S.-backed bankruptcy, was told this week by President Barack Obama’s auto task force to try to restructure its debt out of court, said people familiar with the

Simon Property Group's new "A3/A-" bond issue, which is pricing at a 10.875% yield just got upsized from $500 million to $650 million. Just like the marginal buyers of the MGM 13s of 13 are now very sorry, we smell something quite comparable happening here oh so soon.

In addition to the $261 million loan BWIC reported yesterday by Debtwire, another $233 million BWIC, this time in IG bonds has hit the market. Traders have only until 11 am this morning to submit lowball bids. While loan BWICs over the past month have been increasing rapidly, bond and especially investment grade bonds have not seen wholesale blue light specials yet.

The search for safe spots in the market rout so far this year has resulted in some curious hiding places. The big rotation out of equities in the end of 2009 and into credit has accelerated, and while IG initially was considered the frontrunner for the safe credit category, it is surprisingly junk debt that has emerged as the best performing sector of 2009.

LPX may have averted bankruptcy in the last moment at the expense of a few gullible investors, who ended up purchasing the bond issue LPX had been marketing for over 5 months. Bank of Countrywide Lynch and Goldman have to be given props for this one as the Stardust odds for a successful LPX bond placement were roughly 10 to 1 against.

Someone is taking project Mayhem in the right direction. The Tokyo Stock Exchange immediately suspended trading of CapCom bonds after a 3 trillion Yen order was placed. Unfortunately the entire outstanding issue is only 15 billion Yen.

A good analogy would be a trader (Obama) placing a $3 trillion market bid order in the common equity of Citi, which only has $15 billion outstanding.

The credit market is on fire, as is proof that greater fool theory is alive and well. Yesterday saw the placement of 3 high yield issues at a much more reasonable original issue discount, and yet accounts were swarming like flies on excrement with lipstick. All three issues have immediately generated about 1-2 points return post break, leading many original allocators to flip their holdings to naive secondary market bidders.

Despite some muddled explanations from its administration on how Russia may or may not be in fact filing for private sector (but definitely not sovereign) bankruptcy, this story shows why some sort of default is imminently unavoidable as essentially the entire Russian private sector is now shut out from the primary bond market, with no foreign bond issues since August 2008.