Tuesday, August 07, 2007


Payback time. It will be interesting to see what the Fed will tell us in their statement....I think we won´t hear the word "contained" .......

Zahltag. Bin gespannt was die Fed heute im Statment so zum Besten gibt. Ich tippe mal darauf das wir das Wort "contained" nicht mehr so oft zu hören bekommen......

Even Nonhousing Markets Feel Mortgage Fallout

The day-to-day financial dealings of Oneida Limited, the dinnerware and flatware maker, are typically about as far removed from the mortgage loan business as they can be.

Yet, like the proverbial flapping of a butterfly’s wings that sets off a storm thousands of miles away, the turmoil in the home mortgage market this summer directly affected the fortunes of the company, based in upstate New York, when it was forced to withdraw a planned offering of $120 million in high-yield bonds to investors as the credit markets froze up seemingly overnight
If the deal had been offered just a month earlier, said Andrew G. Church, Oneida’s chief financial officer, the company would have had no trouble raising the money. “But it happened so quickly,” he said. “We’ve never seen anything as quick as this.”

“The liquidity in the credit markets was abysmal,” said William H. Gross, chief investment officer of the bond management firm Pacific Investment Management Company, known as Pimco. “On Friday afternoon, the brokers were unwilling to make markets in almost anything that didn’t have a Treasury or agency sticker attached to it. That’s pretty bad.”
The trading-in-a-vacuum phenomenon is only the latest evidence of how the days of easy, cheap money for corporations and individuals alike have disappeared. The ripple effect is being felt by nearly everyone.

In this bond market rout, debt instruments have had billions of dollars of value wiped out in just a few weeks. By some estimates, the high-yield market alone has lost nearly $50 billion in value since early June. Others say losses in the less easily traded mortgage- and asset-backed securities markets could easily run in the hundreds of billions of dollars.
Whatever the future holds, many say what is leading this debt meltdown is the recognition that credit in recent years had simply become too cheap and too accessible for far too many individuals, hedge funds, private equity firms and corporations.

The gap between prices for high-yield corporate debt and Treasury securities in early June traded at a historic low, suggesting that investors saw little more risk in owning the debt issued by companies with blotchy credit histories than in government-issued debt. In a matter of weeks, that spread has more than doubled.

High-yield bond offerings fell off a cliff last month. In July, only $2.4 billion in junk bonds were issued, a steep decline from the $22.4 billion that came to market in June, according to Thomson Financial.
High-quality bonds issued by companies with sterling credit have not been immune to the rout either. Investment-grade bond issues fell to $30.4 billion in July — the lowest monthly total in five years — from $109 billion in June, according to Thomson.
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Anonymous Anonymous said...


Looking at the chart the recent July increase in spreads has been due to the fall in treasuries not an increase in the price of high yield. Of course this is an average and one can imagine far more discrimination being introduced and of course the big supply drop offs would be a part of this process.

Yields rather than spreads are at levels of last year. Maybe everyone just took an early holiday.

5:41 AM  
Blogger jmf said...


I think the real story is that it is or was almost impossible to unload any risky asset.

As a short it is very refreshing not to live with the fear that a Private Equity company will buy out another REIT etc.... :-)

6:41 AM  
Blogger jmf said...

Virgin Media Delays Sale, Citing Debt Market Turmoil

7:39 AM  
Blogger jmf said...

Bondholders Punish Tyco, Kimberly for Buybacks, LBOs

7:41 AM  

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