Verizon

The cardinal rule of investing – and life, frankly – is, according to ConvergEx's Nick Colas, "When the facts change, you have to change your point of view."  The Fed’s decision to maintain its current pace of bond buying at yesterday’s FOMC meeting is one of those fact-changing events.  Markets were primed for a reduction, and along with a host of other flashing yellow lights that was enough to make plenty of market watchers cautious.  Yes, the Fed will eventually cut the QE tow rope if/when labor markets improve, but for now, Colas notes, they seem content to keep toting the barge and lifting the bale.  That leaves markets free to head to the bar, hopefully avoiding incarceration along the way.  Remember 1999 though, he warns, when markets ripped through Q4 because so many investors had bided their time waiting for the dot-com bubble to collapse earlier in the year?  Cue the music, because this is beginning to look like the same market setup.

• Bernanke Resets Policy by Doing Nothing as Markets Soar (BBG)
• Stocks Jump to Five-Year High as Metals Rally on Fed (BBG)
• Centre-left bigwig says hard to stay allied with Berlusconi (ANSA)
• J.P. Morgan 'Whale' Fine Put at Over $900 Million (WSJ)
• Banks’ $10 Billion Sweet Spot Sets Off Buying Spree for Lenders (BBG)
• Time to taper? Not if you look at bank loans (Reuters)
• Mortgage Lending Reaches 5-Year High (WSJ) ... and then plunges as Fed gives "all clear" for a few months
• Yellen Chances Grow as Obama Aides Test Senate Support (BBG)

• Fed likely to reduce bond buying, pass policy milestone (Reuters)
• Fall in Home Loans Pushing Fed Away From Taper in Mortgage Bonds (BBG)
• Russia says U.N. report on Syria attack preconceived, political (Reuters)
• China House Price Surge Raises Prospect of Steps to Cool Market (FT)
• Cyprus Plans to Complete End of All Capital Controls... some time in 2014 (FT)
• GOP Reworks Budget Terms (WSJ)
• U.S. Navy was warned that Washington shooter 'heard voices' (Reuters)
• Berlusconi Impeachment Vote Looms (WSJ)
• Ageing could weaken central banks, spur rate volatility (Reuters)

• Less Tapering Becomes Tightening Credit No Matter What Fed Says (BBG)
• Yellen Is Now Top Fed Hopeful (WSJ)
• Syria - A chemical crime, a complex reaction (Reuters)
• More ECB collateral: Wrecked cruise ship Costa Concordia raised off rocks in Italy (Reuters)
• Aging Boomers Befuddle Marketers Eying $15 Trillion Prize (BBG)
• Abe Turns Pitchman, Says Japan Is Now A Buy (WSJ)
• Ex-JPMorgan Employees Indicted Over $6.2 Billion Loss (BBG)
• Barack Obama blinked first in battle for Lawrence Summers (FT)
• Berlusconi to support Italian government in video message: sources (Reuters)
• How China Lost Its Mojo: One Town's Story (WSJ)

One would think Laura Dimon, the daughter of one James Dimon, would be on familiar terms with such concepts as bonds, capital structure and finance (especially the more arcane substrata thereof). After all the father of the graduate from the Columbia School of Journalism (author of such previous pieces as "The Last Office Taboo for Women: Doing Your Business at Work" which examines "the lengths women go to avoid getting caught in the stall") is none other than the CEO of the largest bank in the US, best-known for such "one-time items" as constantly recurring legal charges associated with financial innovation gone horribly wrong (today's rumor of a $750MM settlement over the bank's London-based prop trading group being a case in point). As it turns out, one may be mistaken...

Have a listen if you need a laugh this morning, but there is really nothing funny about this:

• U.S., Russia to push for new Syria peace talks (Reuters)
• Elite Syrian Unit Scatters Chemical Arms Stockpile (WSJ)
• Obama to nominate Summers as Fed chief: Nikkei (Reuters)
• Boehner Wants Joint Talks on Debt, Budget (WSJ)
• House Republicans go for broke in fiscal battles (Reuters)
• Pimco, BlackRock Together Received More Than a Quarter of Verizon's $49 Billion Bond Deal (WSJ)
• Insane financial system lives post-Lehman (Gillian Tett)
• JPM to add $2.5 billion to its litigation reserves in the second half of the year (WSJ)
• Goldman’s Zurich offices visited over working-hours complaint (FT)

Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,”  pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?

We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.

— Twitter (@twitter) September 12, 2013

Yesterday's record Verizon bond offering, which to some had an eerie sense of deja vu to the TXU 2007 mega-LBO just before the market blew up, caught many by surprise: not only did the underwriters have no problem obtaining over $100 billion in orders to oversubscribe demand for the $49 billion offering, but following the break the bond immediately proceeded to trade a whopping 40-70 bps tighter implying yield pricing could have been done well lower, but the CDS also ripped 11bps tighter. Because nothing says less default risk like $49 billion more in debt. But where did all this demand come from? Did accounts simply have $100 billion in cash lying around? The answer is no, and as the following breakdown of the post-break action in VZ from Deutsche demonstrates, what happened yesterday was a great rotation into the NSA-favorite company and the Telecom space in general, and out of virtually every other credit in the market.

• Syrian Rebels Hurt by Delay (WSJ), U.S. seeks quick proof Syria ready to abandon chemical weapons (Reuters)
• Lavrov Brings Acerbic Pragmatism to Syria Meet With Kerry (BBG)
• Five years after Lehman, risk moves into the shadows (Reuters)
• U.S. shares raw intelligence data with Israel, leaked document shows  (LA Times)
• Japan to raise sales tax, launch $50 bln stimulus (AFP) - so 1) lower debt by sales tax, then 2) raise debt through stimulus.
• Blackstone’s Hilton Files for $1.25 Billion U.S. Initial Offer (BBG)
• Second Life Bankers Thrive in Dubai as Boutiques Boost Fees (BBG)
• Brussels probes multinationals’ tax deals (FT)
• Wall Street's Top Cop: SEC Tries to Rebuild Its Reputation (WSJ) ... and fails
• Tablet sales set to overtake PCs (FT)
• The end of angst? Prosperous Germans in no mood for change (Reuters)

Hamilton Says Americans Should Be More Outraged About Spying Abuses

Desperation and the sound of hot air hissing out of the Bond Bubble

Just a little excess liquidity sloshing out there. Here is the full breakdown of the just priced, 8-part $49 billion deal, the largest ever.

Smashing the previous record $17 billion deal from Apple which is doing so badly (in yield and spread terms), Verizon - in order to fund the mega deal with Vodafone - is launching an 8-part $49 billion deal done at what appear reasonable spread levels (though spreads are dramatically wider than a month ago as one would expect for such a releveraging). With the bulk of the deal ($36 billion) maturing 7 years or longer, it would appear that (and desk chatter confirms) demand was relatively high and BofAML also notes that Verizon will now have a huge $69 to $79 billion of index-eligible bonds. This will make Verizon the 4th largest issuer in the US high-grade market index, right up their with Goldman Sachs and Citigroup. Amid all this exuberance though, something odd popped up:

• *VERIZON POSTPONES EUROPE INVESTOR MEETINGS ABOUT VODAFONE DEAL

Reuters is reporting that with a $101 billion order book already, it appears they had no ned to shop the deal in Europe. Amazing what ZIRP repression will do...