Credit Research

Junk Bonds Are Finally Starting To Care About Oil

"The recent price action in the oil market and the stronger response of the HY Energy sector has prompted many market participants to question the ability of the broader HY market to continue to resist lower oil prices. In our view, the bar remains high for oil prices to become the main directional driver of HY spreads but the risk has risen."

"A Reverse Rollup From Hell": China's "Boldest Dealmaker" Faces Margin Call Disintegration

China's "boldest dealmaker", HNA Group, suddenly faces not only growing regulatory scrutiny from Beijing that threatens to raise HNA’s financing costs, but also send its shares plunging as holders are forced to liquidate, accelerating the company's demise. And, in an scenario that can only be dubbed as a "reverse rollup from hell" if the value of its stock price falls enough, HNA may soon be forced to disintegrate.

Connecticut Capital Hartford Downgraded To Junk By S&P

"The downgrade to 'BB' reflects our opinion of very weak diminished liquidity, including uncertain access to external liquidity and very weak management conditions as multiple city officials have publicly indicated they are actively considering bankruptcy," said S&P Global Ratings credit analyst Victor Medeiros.

"From Horrific To Catastrophic": Court Ruling Sends Illinois Into Financial Abyss

“Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Comptroller Susana Mendoza, a Democrat, said in an emailed statement after the ruling. "Ppayments to the state’s pension funds; state payroll including legislator pay; General State Aid to schools and payments to local governments will likely have to be cut.”

Spain's Banco Popular Bailed In, Acquired By Santander For €1.00

Just four days after Banco Popular chairman Emilio Saracho told his employees "don't panic" as a result of the company's crashing stock price, on Wednesday morning the ECB confirmed that the sixth largest Spanish bank was indeed on the verge of collapse and ordered it to be sold, which is what happened when Santander acquired the bank for €1.00 after Santander's equity and riskiest debt instruments were wiped out.

Goldman Spots An Odd Divergence In Energy

"To put things in context, HY Energy credits have returned 2.3% year to date vs. 3.3% for the broader HY index, while Energy equities are down 9.6% vs. a positive price return of 6.8% for the S&P 500."

Futures, Global Stocks Rise As Oil, USDJPY Drops: All Eyes On The Jobs Report

With all eyes on today's jobs report, where consensus expects a 180K payrolls gain, European, Asian stocks and S&P futures all rise amid a surge in government debt as markets digest the BOE's "kitchen sink" easing for a second day. But please don't overthink it. In deja vu fashion, Bloomberg summarizes the action simply as "stocks rose around the world on speculation central bank stimulus measures will support the global economy." We've heard that just a few times before.

Japan Banks May Soon Pay Borrowers To Take Out Loans

Japanese banks may soon pay borrowers to accept loans if they can raise funds at even cheaper rates. Negative interest-rate lending is increasingly becoming a reality since the Bank of Japan started levying charges on idle cash. Lenders can now borrow for three months in the Tokyo interbank market at a record-low 6 basis-point annualized rate, versus 17 basis points since the BOJ move in January. They may eventually be able to be paid to borrow and then profit by paying less to lend, according to Credit Suisse Group AG, JPMorgan Chase & Co. and SMBC Nikko Securities Inc. This is also known as shoving money down people's throats... and then paying them for it.

Greek Banks Just Became A "Strong Sell" At Any Price

Even as Greek banks, severely depleted of cash and eligible collateral they can post with the ECB, stand to fight another day (and potentially face more withdrawals as soon as the Greek banks reopen supposedly on Monday) thanks to another €900 million liquidity infusion, investors in Greek bank shares will be less lucky: "to ensure a new bailout, investors in the country’s banks faced the prospect of their holdings being "wiped out" under the terms of a €25 billion recapitalization plan."