Debt-Limit Deal to Get Congress Vote Today (Bloomberg)
Debt compromise favours Republican demands (FT)
An Agreement Is Struck, but the Deficit Isn't Solved (WSJ)
Hedge fund firm Lansdowne sells Goldman stake (Reuters)
China’s Official PMI Falls (WSJ)
Asia’s Economic ‘Soft Patch’ Jars With Inflation, Posing Dilemma on Rates (Bloomberg)
Lagarde Warns EU to Speak with one Voice (FT)
An Uncomfortable Final Stretch for Trichet (FT)
What is worse is that it looks like the pace of layoffs is going to keep increasing.
Stocks and spreads lost ground today following an ebullient pre-open and relatively stable start as early up-in-quality themes played out. Breadth in credit was positive but low beta considerably outperformed high beta and there was notable net selling in the secondary corporate bond market especially in the Financials and Consumer NonCyclical sectors.
Ever felt excluded from the list of people who can (allegedly) buy insurance on their neighbor's house, and then burn it down? That's all about to change. The CBOE has announced that that on Tuesday, March 8, the Exchange will begin trading newly-designed Credit Event Binary Options (CEBOs) contracts. In essence these will be like Credit Default Swaps, accessible to everyone, which will have a $1000 payoff per contract in the event of a bankruptcy before contract expiration. Since the contracts will have specific prices, they will in essence replicate the LIBOR spread on CDS (or the inverse cash bond pricing from par), and the closer a company is seen as being to bankruptcy, the higher the contract price. What this will do is to revolutionize the shorting aspect of trading, as there will be no borrowing need to express a bearish outlook on a company, and no possibility for State Street, BoNY or your favorite repo desk to pull your borrow from underneath your feet thus forcing a short squeeze. In essence, this will be a marginable equity product trading as a credit derivative. We are delighted that finally one will be able to express a bearish opinion without fears of gross market manipulation and melt up, as the CEBOs will have little or no structural relationship to what happens with the broader stock market.
- Fed likely to announce $500B of securities purchases: Bloomberg survey.
- India's central bank raised interest rates by 25 bps - for a sixth time this year.
- Yen declines against Euro as Asian recovery signs reduce demand for refuge.
- Alberto-Culver's Q4 net rises 31% on 12% jump in sales.
- Altra Hldgs sees FY10 EPS of $0.95-1.00 (cons $0.88); revs at $512-517M.
- Anadarko Petroleum reported Q3 EPS of $0.21, 28% below the average analyst estimate.
- Archer-Daniels-Midland's Sept. net income declined from $496M to $345M.
Spreads ended the day notably wider (HY wider than 'flash-crash' close) with stocks managing to slightly underperform on a beta-adjusted basis as broad-based selling in single-names and indices made today feel a little more 'real' than recent swings. There are a few signals of regime change today that make us nervous even with potential clarity from Germany and FINREG due very soon. After some midday covering on EUR (eh hem intervention), the cloture vote triggered more selling and that weakness gathered pace and stocks and credit closed considerably weaker. ES_F closed at the lows of the day and while credit was weak, equity's beta-adjusted performance was notably worse than credit's on the day. HY, which traded over 690bps intraday (shy of the intraday wides of 706bps on 5/6), closed wider than the 'flash-crash' day's close taking it back to end NOV09 wides. IG was weak but remained inside of the 5/6 closing levels. HY-IG decompressed further and we hop those clients who followed us into this trade move those stops up to at least breakeven now (with a target of 600bps).
- Asian stocks fall for fifth day on Europe concern; Commodity shares gain.
- British government plans to partially privatize struggling Royal Mail.
- China officials say won't yield to yuan pressure at U. S. talks.
- China's growth unexpectedly accelerated in the first quarter of 2010: Poll.
- Euro falls to lowest since April 2006 on European debt crisis.
- Fed officials are in no rush to sell mortgage assets, Meeting minutes show.
Spreads closed modestly wider today with HY underperforming IG and both underperforming stocks as an afternoon rally helped the indices but left single-names decidedly less sanguine. Intraday swings remain somewhat volatile in US and EUR credit and activity in the US definitely tailed off as Europe closed and the afternoon began. M&A/LBO deals dominated much of the idiosyncratic action today but breadth remained negative and not supportive of any aggressive rerisking sentiment for now. Importantly there was widespread credit underperformance and equity outperformance today as the Pactiv and UHS deal suggest relevering being priced into the capital structure and seemed to spread some contagion across other deal-worthy names.
Spreads rallied today with HY outperforming IG but neither IG nor HY able to get down to Monday's tightest levels as we note 3Y continuing to underperform 5Y (albeit both compressing today) as risk seems to be dragged nearer-term and credit is definitely less Utopian than equities.
Spreads exploded wider today across all markets as contagion from Europe smashed risk appetite everywhere as broad-based macro/index selling/hedging was clearly in play. So many record-breaking moves and breathless dealers that we are a little stunned still by today's action but to be clear, credit was leading equity down out of the gate, did not crash and bounce anything like stocks late afternoon, but closed at 10-month wides in IG and six month wides in HY.
Spreads managed to hold onto modest widening today in the US as IG underperformed HY, indices underperformed intrinsics, single-name activity was extremely muted, and low beta underperformed high beta. Notable underperformance in Europe, spreading idiosyncratic sovereign risk to SovX to FINLs to Main and up to XOver was not enough to upset the optimistic US investor today, though it was one of the least convicted days in a long time.
- Asian stocks rise on strengthening global economy; Euro declines on Greece.
- Crude oil declines for first day in three on increase in US inventories.
- Euro drops to record versus Franc, 10 month low against Dollar on Greece.
- Fiat seen cutting 5,000 jobs – report
- Japan approves record $1 trillion budget amid debt concerns.
- Japan exports in February increased 45.3%.
- Germany, France agree on IMF role in Greece's budget crisis, Official says.
- Mortgage applications in the US down 4.2%.
- Asian stocks drop, Yen rises on Greece, concern Fed may withdraw stimulus.
- Bank of Japan leaves policy unchanged, resisting pressure to ease further.
- Fed sets goal of 'eventual' exit from housing finance to protect autonomy.
- Gold declines for second day on IMF's plans for open-market bullion sales.
- Leading Economic Index in US probably increased for 10th straight month.
- Michigan state public retirement funds is $50B short
- Oil falls below $77 as US distillate supplies rise
- Abu Dhabi is set to award almost $2B in onshore oil service contracts.
- Most Asian stocks decline as European deficit concerns increase.
- China's January surge in lending probably exceeded fourth quarter's total.
- Copper imports by China may halve from last year’s record.
- Dow closes below 10,000 for first time in 3 months.
- ECB may be forced to delay exit of emergency lending measures amid Greece concern.
- Australia removes large-deposit guarantee amid signs of economic recovery.
- Brazil poised for Latin America's first rate increase as growth picks up.
- Corporate bond yield spreads widen the most since November: Credit Markets.
- Euro, Asian stocks fall as G-7 fails to end concern over Greece, fiscal budgets.
- G-7 governments risk 'muddled middle' with plan to spend now, save later.
- Greenspan sees 'slow' recovery, would be 'very concerned' if stocks drop.