When the results for the sale of $28bn in 7 paper printed, the result was a modest tail, with a high yield of 1.389% tailing the 1.385% When Issued. As a reminder, last month's 7Y auction had an even bigger tail but that was due to concerns of a potential rate hike by the Fed in September; this time there was no such concern.
We were not surprised to see the high yield print at 1.129%, tailing the 1.128% When Issued by a marginal 0.1 bps. Putting this in context, it was the second lowest 5Y auction yield since June 2013, with the exception only of last month's auction pricing at 1.25%
The highly-anticipated first presidential debate of 2016 is finally upon us and here are all the things that you need to know but are likely too lazy or simply not interested enough to track down on your own
After one the biggest rallies in the last seven years off the Feb lows, high-yield bond investors are rushing into bearish (hedge) positions ahead of this week's Fed/BoJ spectacle. Put volume (protecting downside) in the last few days has soared to levels only seen around Brexit and last December's Fed rate-hike as Bloomberg notes, investors have already become skittish on signs that global central banks may turn off the spigot.
Goldman has been using the proceeds from the new deposits to directly fund speculative activity such as trading and investments, as well as more conventional activity such as creating looans. Goldman Sachs built up its consumer bank, led by 40-year-old Goldman partner and credit trading veteran Gerald Ouderkirk, whose job is to use consumer deposits and other types of funding for trades, investments and loans.
“The funny thing is there is a disconnect between what investors are saying and what they are doing. No one thinks all the problems the global financial crisis revealed have been healed. But when you have an equity rally like you’ve seen for the past four or five years, then everybody has had to participate to some extent. What you’ve had are fully invested bears.”
Moody's has caught up to what readers of Zero Hedge knew half a year ago. According to the rating agency, creditors of energy exploration and production companies that went bankrupt last year recouped less than half the usual amount for their claims, and 2016 is shaping up just as bad. Moody's even went so far as to even use the "C" word: "Recovery rates for 15 U.S. E&P bankruptcies averaged a “catastrophic” 21 percent last year, well below the historical average of 59 percent."
The old Wall Street expression is “They don’t ring a bell at the top.” This snarky adage is usually employed by those saddened financial managers who ride a successful investment to a peak and then watch in horror as it reverses course to a level below their cost basis. A pity this notion is misguided, since the market frequently “rings the bell.” It is just that most market participants are not listening. Perhaps they should be listening now.
In his presentation titled appropriately "Turning Points" (presented below) Gundlach said that “this is a big, big moment," predicting that “interest rates have bottomed. He also said that the Fed "wants to show that they are not guided by the markets" and that "they can’t be replaced by WIRP." A Fed surprise would send rates spiking, and Gundlach warns the 10Y may close 2016 at 2% or higher.
"We think the 'bad news is good news' theme has mostly played out in the near term, and any additional weak economic data will likely be met with market skepticism. Additionally, payoffs are asymmetrically skewed at the moment, with hawkish commentary or a surprise hike likely being met with a much fiercer selloff compared to additional tightening caused by a continuation of the norm."