C.M.O. 5.19.2009
Credit Market Overview
May 19, 2009
May 19, 2009
Like the bedraggled hiker that catches up to the group only to have them start off again without the one who needs the rest actually getting any; Citigroup (C) issued $2BN bonds last Friday without the FDIC’s backing. The “too big to fail” guarantee, while not explicitly priced into the bonds is implicitly obvious as $50BN in TARP funds props up what would have long ago fallen down.
The $2BN issue which was over subscribed by $4BN is further evidence that 562.5bps above the 10-year Treasury that C paid investors was seen as the best ultimately risk-free risky asset for sale last week. Bid to cover ratios of 2:1 are seen as a sign of success when the Treasury itself issues debt and it will yearn, in the years ahead, for those types of numbers as it issues more and more debt. Bids for three times the amount of C paper for sale is enough to make even the Government jealous.
Citi’s CDS spread had come off its 666bps highs seen on April 1st of this year and traded as low as 343bps on May 8th. The 5 year benchmark quote was 412bps last Friday 20bps higher than yesterday’s quote. This would have put the 10-year CDS at ~373bps, about 190bps less than the market required to warehouse the Citi paper which, for intent and purposes, is white labeled Government debt. C closed at $3.64 yesterday down from $23.12 a year ago which would also be the 52 week high.
As for the group the hiker, we would say piker but there is nothing small about $50BN, was trying to catch up to? That would be Goldman Sachs (GS), Morgan Stanley (MS) and JP Morgan (JPM) who yesterday asked for approval to repay a combined $45BN in TARP funds. It should also be noted that the amount to be repaid for those three firms is less than the amount of TARP funds owed to the taxpayer by C.
A quick run through of how the troika stand. GS closed last night at $143.15 up from its March 9th low of $73.95. The CDS levels for GS were 371bps on 3/9 and 173bps yesterday. MS’s March 9th numbers were 476bps and $16.48 vs. 265bps and $28.28 last night. JPM numbers for the same dates were: 242bps, $15.90 and 110bps, $37.26
Going back a little farther the current levels for GS’s and MS’s CDS’s were last seen in early September (pre-LEH) of last year. A graph of JPM’s CDS’s looks a bit more like an EKG printout as the 110bps level, or thereabouts, has been seen a number of times over the past year. A low of 88bps was reached in mid-October of 2008 and a year ago JPM’s CDS’s were quoted at ~60bps.
How different things looked a year ago at this time.
Enjoy the week.
Jim Delaney
The $2BN issue which was over subscribed by $4BN is further evidence that 562.5bps above the 10-year Treasury that C paid investors was seen as the best ultimately risk-free risky asset for sale last week. Bid to cover ratios of 2:1 are seen as a sign of success when the Treasury itself issues debt and it will yearn, in the years ahead, for those types of numbers as it issues more and more debt. Bids for three times the amount of C paper for sale is enough to make even the Government jealous.
Citi’s CDS spread had come off its 666bps highs seen on April 1st of this year and traded as low as 343bps on May 8th. The 5 year benchmark quote was 412bps last Friday 20bps higher than yesterday’s quote. This would have put the 10-year CDS at ~373bps, about 190bps less than the market required to warehouse the Citi paper which, for intent and purposes, is white labeled Government debt. C closed at $3.64 yesterday down from $23.12 a year ago which would also be the 52 week high.
As for the group the hiker, we would say piker but there is nothing small about $50BN, was trying to catch up to? That would be Goldman Sachs (GS), Morgan Stanley (MS) and JP Morgan (JPM) who yesterday asked for approval to repay a combined $45BN in TARP funds. It should also be noted that the amount to be repaid for those three firms is less than the amount of TARP funds owed to the taxpayer by C.
A quick run through of how the troika stand. GS closed last night at $143.15 up from its March 9th low of $73.95. The CDS levels for GS were 371bps on 3/9 and 173bps yesterday. MS’s March 9th numbers were 476bps and $16.48 vs. 265bps and $28.28 last night. JPM numbers for the same dates were: 242bps, $15.90 and 110bps, $37.26
Going back a little farther the current levels for GS’s and MS’s CDS’s were last seen in early September (pre-LEH) of last year. A graph of JPM’s CDS’s looks a bit more like an EKG printout as the 110bps level, or thereabouts, has been seen a number of times over the past year. A low of 88bps was reached in mid-October of 2008 and a year ago JPM’s CDS’s were quoted at ~60bps.
How different things looked a year ago at this time.
Enjoy the week.
Jim Delaney
Labels: CDS, CEC Strategy, correlation, credit, cross asset, equity, Jim Delaney
posted by Jim Delaney at
3:32 AM
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