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Record Plunge In Jefferies Bonds Implies Chance Of Default Is 65% By 2019
Troubled Jefferies & Co does not have actively traded CDS referencing it, which is probably a good thing. It does, however, have cash bonds and while its equity price remains above the lows from two weeks ago, bond prices are cratering and just traded at record lows. The 8.5% of 2019s are actively trading around $92-95 (having fallen from $110 in two weeks and $120 in three months). This price represents a yield of 9.5% (or a z-spread of 823bps!). Translating the asset swap spread of 756bps from this bond into a CDS contract, we see a cumulative 65% probability of default (over the next 8 years) being priced into the market (assuming a 40% recovery).
It certainly seems like the bond market is much more nervous of JEF than the equity market for now:
Charts: Bloomberg
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Nineteen quarters or less... much less.
And people thought that Jeffries was doing ALRIGHT!!!!!!! There had to be a reason why Jeffries got out there and in one week put out 4 stories about their financial distribution.
Bernanke will bail it out.
The race to the exits is on. Things will finally reach a breaking point when there is no more private capital to purchase these bonds and it will only be central banks left. Then we'll either have a break-up of the EU or outright monetization by the ECB and Fed. 2019? Hah. It'll be lucky if they make it to 2013.
In the meantime, retail is gobbling up the yield like candy. Hopefully they'll get their 8% cpn for the next couple payments to make that $40 workout seem less painful.
Retail is gobbling it up. Best offer 92 at the moment. Somebody freaked the fuck out and dumped as low as 82 at the beginning of the month. Sent some shockwaves. High as $123 in September.
This calls for a Dick Handler.
Sanator Rockefeller from West Virginia has told the committee "we've got all the energy you need right here gentlemen." Senator Conrad of North Dakota then added "and more if you need it."
This post takes the non sequitur of the thread award... It also summarizes a fantasy that most Americans have...
Mr. Albert A. Bartlett would beg to differ Mr. Rockefeller,
"The greatest shortcoming of the human race is our inability to understand the exponential function"
http://www.youtube.com/watch?v=u5iFESMAU58
Credit laggin all month ...bitchez
Good luck recovering 40 cents on the $ if this thing goes tits up
Find it hard to believe JEF debt is selling off after they disclosed their exposures repeatedly. Will look at re-shorting JEF equity, naturally.
See Sean Egan on CNBC. Says the next couple of quarters will be a problem for them due to leverage if I recall.
Something from mainstream that I ran across earlier this morning
Seems JPM and the squid arn't too forthcoming on their European exsposure either.
http://www.bloomberg.com/news/2011-11-16/jpmorgan-joins-goldman-keeping-investors-in-dark-on-italy-derivatives-risk.html
Next elevator down?
Damn, that is only about 9 hours from now. WE are so fooooooked.
OH right 'by 2019' yes I see...but until then all is well during the next 8 years, but of course.
by 2019? thats some optimist skittle covered shit being pushed.
The company secretary will be lucky to worry about where to book the 2012 Christmas party.
+1
if MF provides any guidance it will be quick w/ no time to retreat ...
seeing current "market" $91-$92, ruh-roh...
is this headline written correctly? i don't get it.
The bail out will be determined by congressional insider theft holdings .
Hogaaaan!
Bonds never lie......
Hey Joey!! To say you lost your edge is a real understatement.....
http://www.forbes.com/sites/steveschaefer/2011/11/03/top-shareholder-steps-up-for-jefferies-leucadia-buys-1-million-shares/
Maybe you should triple down.
Damn you Waddell & Reed, er, no, it's, Egan-Jones! Bastards!
Clearly Jeffries is the victim of a unique form of domestic terrorism.
Guess they're the next MF Global.
libertarian86.blogspot.com
Jefferies filing for chapter 11 bankruptcy in 3 ... 2 ... 1 ...
Crisis over: the 8.5% bonds just traded at $95.2