• Tim Knight from...
    02/06/2016 - 00:25
    What we must remember is this: we are in a bear market, and the risk of a countertrend rally is present, but confined. The opportunity on the downside movement dwarfs the risk of a push higher, as...
  • Phoenix Capital...
    02/06/2016 - 10:15
    2008 was caused by derivatives based on consumer-focused assets (houses). The next crisis will be driven by derivatives on government-focused assets (bonds).

CDS

CDS
Tyler Durden's picture

CEO Of Europe's Largest Zinc Producer Hints At Default: Bonds Hit Record Lows, Stock Plunges Most Ever





Complacency seemed ready to set back in, with Glencore stock recently rising as high as its recent equity offering price of 125p. And then today we noticed that not only is Glencore's CDS back above 700 bps, the widest it has been in three weeks, but that another mining company has fallen into the market's crosshairs, this time Belgium-based (with Zurich HQ) Nyrstar NV, Europe's largest refined-zinc producer, whose stock crashed the most since its initial public offering in 2007, while it bonds tumbled to a yield of 19%, suggesting a default may be imminent.

 
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The Morning After: Valeant Default Risk Soars After Called Next "Tyco", Sellside "Analysts" Humiliated





As always happens after shocking events like yesterday which "nobody could have possibly predicted", watching the Penguin gallery reel in its humiliation is absolutely worth the price of admission.

 
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We Didn't "Financially Engineer" Our Way Out Of The Great Depression, We Won A World War





The arms race of devaluation is not free and has come at the cost of massive global debt expansion. The world has simply shifted private debt to the public balance sheet. The next major global crash will likely be driven by unhealthy sovereign credit rather than corporate credit. The next Lehman moment will be the financial collapse of a major developed country instead of a bank.

 
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Show Of Hands: Who's Interested In A CDO Backed By A Pool Of Subordinated Community Bank Debt?





Are you a yield-starved investor? Joshua Siegel has a deal he wants to sell you and it involves subordinated loans originated by "35 community banks, some of them so small they don’t have credit ratings." 

 
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Valeant Default Risk Surges As Bond Market Sees 36% Chance Of Bankruptcy





Following Valeant's confirmation that it had received a Federal subpoena, most eyes are on the stock's inexorable decline. However, it is the bond market that not only started showing concerns earlier but is now spiking to record credit risk highs. At a cost of 515bps to protect against a Valeant default, based on market-standard recovery rates, the CDS market implies a 36% chance of default for the former Biotech darling.

 
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Valeant Stocks Tumbles 9% After Company Confirms It Has Received Federal Subpoenas





Back on September 28, when the specialty biotech drug scandal was just getting started and leading to a biotech bear market, Valeant stock suddenly plunged $50 leading to massive losses for its top holder Bill Ackman when it was revealed that House democrats had requested a Valeant subpoena. To be sure, the company promptly made it clear that an official subpoena had not actually been sent, just that some politicians were demanding one. That changed overnight when Valeant issued a press release providing an "update regarding government inquiries", in which we learn that the subpoena is now official.

 
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The Biggest Threat To Glencore's Survival: The Unwind Of China's Copper "Carry Trade"





If we, and Bloomberg, are correct, and if the CFD unwind has only just started impacting the true supply/demand dynamics, and thus price, of copper, then we are only 30% of the way through the unwind of China's copper "carry trade" and thus the 'over-capacity' concerns are massively under-appreciated.

 
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Which Commodites Are Most Levered To A Chinese Crash





The following table attempts to provide a simple composite measure of which commodities are most exposed to China demand, and which stand to lose (or gain) the most in case of a Chinese economic collapse (recovery).

 
Tyler Durden's picture

Biggest Weekly Stock Rally Since 2012 Continues Driven By Tumbling Dollar, Dovish Fed; Commodities Surge





The global risk on mood (which is really anything but, and is merely an unprecedented short covering squeeze as we will report momentarily) launched by an abysmal jobs report one week ago and "validated" yesterday by the surprisingly dovish FOMC minutes, which said nothing new but merely confirmed what most knew, namely that a rate hike is almost certain to not occur until mid-2016 if ever, and accelerated by a Fed-driven collapse in the dollar which overnight has led to a historic 3.4% move in the Indonesian Rupiah the most since 2008, has pushed global stocks even higher in their biggest weekly rally since 2012, despite the start of an earnings season where virtually every single company reporting so far has stumbled on earnings reports that were far worse than even gloomy consensus had expected.

 
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As A Shocking $100 Billion In Glencore Debt Emerges, The Next Lehman Has Arrived





And now the real shocker: there is over US$100bn in gross financial exposure to Glencore. From BofA: "We estimate the financial system's exposure to Glencore at over US$100bn, and believe a significant majority is unsecured. The group's strong reputation meant that the buildup of these exposures went largely without comment. However, the recent widening in GLEN debt spreads indicates the exposure is now coming into investor focus."

 
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Commodity Trading Giants Unleash Liquidity Scramble, Issue Record Amounts Of Secured Debt





In a furious race to shore up as much liquidity as possible, Glencore - which a month ago announced a dramatic deleveraging plan - and its peers have been quietly scrambling to raise billions in secured funding. Case in point none other than Glencore's biggest competitor and the largest independent oil trader in the world, Swiss-based, Dutch-owned Vitol Group, whose Swiss unit Vitol SA earlier today raised a record $8 billion in loans.

 
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