C.M.O. 2.23.2009
Credit Market Overview
February 23 2009
For anyone who is not a Citibank customer it is now cheaper to buy the stock than get cash through one of their ATM’s. Citigroup (C) closed at $1.95 on Friday, the non-customer access charge for cash is $3.00. For you history buffs the last time C was at these levels was 1991. Similarly, at $4.07 a share of stock in The New York Times Company (NYT) is just 7 cents more expensive than its Sunday “bulldog”.
Returning to the banking sector for a moment, while C priced at $1.95, BAC at $3.79 (24-year low) and WFC at $10.91 might appear cheap the same cannot be said about default protection on these entities’ bonds.
CDS levels on Citigroup have increased by 77% in the last 10 trading days closing on Friday at 465bps. BAC has seen a 62.5% increase in its 5 year benchmark CDS contract in the same period and Friday’s 273bps was also an all-time high for the name. Last but obviously not least WFC’s CDS’s have gone up 94.4% in just 8 trading sessions.
The Government was all over the media on Thursday and Friday saying that nationalization was not the preferred option and our erudite Fed Chairman himself has said: “it is challenging for the government to manage banks over long periods of time.” While that might be true who says it has to be a long period of time and possibly more important, what is the Fed going to do when the market pushes the stock prices of these three institutions and some of the other banks to zero?
The markets as a whole seems less than impressed with the verbiage coming out of Washington and one jokester quipped “The last thing that came out of Washington that most of the public was happy to see was the helicopter carrying President Bush to Texas on January 20th!
Craig Peckham, equity strategist for Jeffries says “It’s impossibly hard to call a bottom for bank stocks. With the inability of the marketplace to pinpoint any base value for banks; the loss story and capital erosion picture continue to drive shorts.”
Echoing Craig’s sentiment, Dave Henderson with Dru Stock Inc, described Friday’s saying “Everyone is selling first and asking questions later. I don’t know where the bottom is but we’re one day closer to it.”
With more than 8BN shares changing hands it would appear that those who look to volume for validation are getting the message loud and clear.
Enjoy the week.
Jim Delaney
February 23 2009
For anyone who is not a Citibank customer it is now cheaper to buy the stock than get cash through one of their ATM’s. Citigroup (C) closed at $1.95 on Friday, the non-customer access charge for cash is $3.00. For you history buffs the last time C was at these levels was 1991. Similarly, at $4.07 a share of stock in The New York Times Company (NYT) is just 7 cents more expensive than its Sunday “bulldog”.
Returning to the banking sector for a moment, while C priced at $1.95, BAC at $3.79 (24-year low) and WFC at $10.91 might appear cheap the same cannot be said about default protection on these entities’ bonds.
CDS levels on Citigroup have increased by 77% in the last 10 trading days closing on Friday at 465bps. BAC has seen a 62.5% increase in its 5 year benchmark CDS contract in the same period and Friday’s 273bps was also an all-time high for the name. Last but obviously not least WFC’s CDS’s have gone up 94.4% in just 8 trading sessions.
The Government was all over the media on Thursday and Friday saying that nationalization was not the preferred option and our erudite Fed Chairman himself has said: “it is challenging for the government to manage banks over long periods of time.” While that might be true who says it has to be a long period of time and possibly more important, what is the Fed going to do when the market pushes the stock prices of these three institutions and some of the other banks to zero?
The markets as a whole seems less than impressed with the verbiage coming out of Washington and one jokester quipped “The last thing that came out of Washington that most of the public was happy to see was the helicopter carrying President Bush to Texas on January 20th!
Craig Peckham, equity strategist for Jeffries says “It’s impossibly hard to call a bottom for bank stocks. With the inability of the marketplace to pinpoint any base value for banks; the loss story and capital erosion picture continue to drive shorts.”
Echoing Craig’s sentiment, Dave Henderson with Dru Stock Inc, described Friday’s saying “Everyone is selling first and asking questions later. I don’t know where the bottom is but we’re one day closer to it.”
With more than 8BN shares changing hands it would appear that those who look to volume for validation are getting the message loud and clear.
Enjoy the week.
Jim Delaney
Labels: CDS, correlation, credit, equity
posted by Jim Delaney at
2:29 AM
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