Tuesday, October 09, 2007

Junk-Grade Defaults ‘More Likely’ / FT

I´ll bet that we will see much higher default rates than the agencies are forecasting. When you look at the spreads (chart Bespoke) there is much more room to the upside. Especially when you keep this in mind

Ich bin mir ziemlich sicher das wir in der Zukunft noch deutlich höhere Ausfallraten sehen werden als jetzt vorhergesagt werden. Hier ein Spreadchart via Bespoke der sehr anschaulich zeigt das hier noch "Luft ist". Das gilt insbesondere wenn einige Details näher beleuchtet werden.

More securities than ever have the lowest rankings, with CCC ratings assigned to 26.5 percent of the new debt, according to New York-based Fitch Ratings. That compares with 15 percent in 2006 for debt that itch says has a ``high default risk.''

Bonds that allow companies to pay interest in extra securities instead of cash, including toggle notes, accounted for almost 9 percent of high-yield debt sold this year, compared with less than 1 percent three years ago

Junk Grade Defaults More Likely / FT
Moody’s Investors Service said last month that company default rates in the junk-grade sector would rise by nearly 300 per cent as the credit squeeze hit the wider economy.

The agency predicted that the global speculative-grade default rate would rise from 1.4 per cent now, meaning only 1.4 per cent of the companies rated have defaulted in the past year – to 4.1 per cent in a year’s time and 5.1 per cent in two years’ time.

> Compare the prognosis (dotted chart-line) from the beginning of 2007 with the latest estimate. They had "calculated" roughly a 36% lower default rate. Here is another number that is hinting that the models from the rating agencies one more are outdated.....

> Vergleicht die Prognose im Chart von Anfang 2007 mit den aktuellen "Erwartungen". Hier noch eine weitere Hausnummer die darauf deuten läßt das die Modelle der Ratingagenturen in guten wie in schlechten Zeiten Ihren Zweck evtl. nicht erfüllen......

Distressed Bonds Increase Most Since 2003 / Bloomberg

The corporate bond market's favorite securities last year, so-called distressed debt, yield at least 10 percentage points more than Treasuries. Since June, the amount of distressed bonds has risen more than fivefold to $24.8 billion, according to an index Merrill Lynch & Co. began compiling in 1997.

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Blogger jmf said...


King Suggests He Won't Reduce Rate to Shield Banks

1:31 AM  
Blogger jmf said...

Bring on more debt.....


Alcoa plans to buy back up to 25% of its outstanding shares, up from January plans to buy back 10% of its stock. It's already bought back half of the shares planned in that earlier program, leaving it with the green light to purchase an additional 174 million shares, worth $6.9 billion based on Tuesday's closing price.

The drop in the U.S. dollar against currencies including the Australian dollar, the Brazilian real and the euro, meanwhile, has dragged down profit by $100 million this year. Alcoa's profit margins get squeezed when the dollar falls because it pays its workers in mineral-rich countries like Australia in their local currency, but sells metals in a U.S. dollar-denominated market.

2:19 AM  
Blogger jmf said...

More from the earnings front....

Valero warning
Chevron warning
Petsmart warning
Monsanto warning
International Paper warning
Downey (DSL) warning

So far it didn´t hurt the futures....

5:46 AM  
Blogger jmf said...

Goldman:Aug level 3 asset value $72.05B, 7% of total

the size of its level 3 assets at the end of third quarter increased to $72.05 billion from $54 billion at the end of the second quarter.

Goldman Sachs said level 2 assets at the end of third quarter amounted to $494.6 billion. There may be some market activity for level 2 assets but the valuations often depend on internal models

In connection with its lending activities, the firm had outstanding commitments to extend credit of $135.53 billion as of August, compared with $100.48 billion at Nov. 30 fiscal yearend

8:50 AM  

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