C.M.O. 5.5.2009
Credit Market Overview
May 5, 2009
May 5, 2009
We’ve all heard the market adage that a bull market climbs a wall of worry. I’m thinking they should change that last word to “wonder” as the move off of the March lows has been spectacular to say the least and if you can believe the media (rhetorical question) one that has left many wondering: “How did I miss that move?”
The “fake it till you make it” crowd also seems to be gaining some credibility as last month’s better than expected Industrial Production and GDP numbers in China were given an eye-roll by most as it was ventured that the long/strong arm of the government in the People’s Republic could manufacture economic statistics with the same efficiency that the factories there produce washing machines. (Disbelief runs deep after you see C trade at 79 cents.)
That there was so much emphasis on the personal consumption numbers portion of our own GDP figures last week seemed an equally implausible effort at making believe the car was running fine when it was just rolling down hill. All of this incredulity was given a jolt yesterday as the PMI index for China’s manufacturers came in at 50.1.
There is no doubt the car was rolling down hill but now the question must be asked whether it was to gain some momentum before popping the clutch and could the global economic engine, long thought to be China on the next leg up, be sputtering to life?
The move in the indexes, did leave some at the station but regardless of how little the financials now count in the indexes the move in the previously mentioned C from a low close of $1.02 on March 5th to $4.01 on the day before most of us pay our taxes, sans the head of the IRS of course, was a something only those who jump out of airplanes without parachutes would have participated in.
For all of the talk of the three letters of recovery; V, U and L, the last of which looks very little like a recovery at all, there has been adamant discourse about why this one [recovery] won’t look like the first one [V]. To the extent that this whole thing is far from over, the sliver of market time Feb 13th and March 23rd looks pretty “V” to me.
The credit markets experienced a bounce of their own during this period but only if you look at prices ass spreads look more like the ball was thrown against the ceiling. Here too the most drastic moves were in those bonds that looked most deadly, or really just mostly dead.
Laurence Fink, CEO of Black-Rock, said recently that the low yields on Treasuries was pushing investors further out the risk spectrum and in the time just past that meant paper branded CCC. Most of this paper was trading below 50 cents on the dollar while the S&P was clicking off triple sixes and the postponement of Armageddon has done for these bonds what it did for stocks and as such yields came down as prices rose.
We’re back to even, or thereabouts, on the year if your yardstick is the S&P. So far, so fast both down and up it’s been like getting caught in a revolving door and winding up right back where you came from.
The question is where do we go from here?
Enjoy the week.
Jim Delaney
The “fake it till you make it” crowd also seems to be gaining some credibility as last month’s better than expected Industrial Production and GDP numbers in China were given an eye-roll by most as it was ventured that the long/strong arm of the government in the People’s Republic could manufacture economic statistics with the same efficiency that the factories there produce washing machines. (Disbelief runs deep after you see C trade at 79 cents.)
That there was so much emphasis on the personal consumption numbers portion of our own GDP figures last week seemed an equally implausible effort at making believe the car was running fine when it was just rolling down hill. All of this incredulity was given a jolt yesterday as the PMI index for China’s manufacturers came in at 50.1.
There is no doubt the car was rolling down hill but now the question must be asked whether it was to gain some momentum before popping the clutch and could the global economic engine, long thought to be China on the next leg up, be sputtering to life?
The move in the indexes, did leave some at the station but regardless of how little the financials now count in the indexes the move in the previously mentioned C from a low close of $1.02 on March 5th to $4.01 on the day before most of us pay our taxes, sans the head of the IRS of course, was a something only those who jump out of airplanes without parachutes would have participated in.
For all of the talk of the three letters of recovery; V, U and L, the last of which looks very little like a recovery at all, there has been adamant discourse about why this one [recovery] won’t look like the first one [V]. To the extent that this whole thing is far from over, the sliver of market time Feb 13th and March 23rd looks pretty “V” to me.
The credit markets experienced a bounce of their own during this period but only if you look at prices ass spreads look more like the ball was thrown against the ceiling. Here too the most drastic moves were in those bonds that looked most deadly, or really just mostly dead.
Laurence Fink, CEO of Black-Rock, said recently that the low yields on Treasuries was pushing investors further out the risk spectrum and in the time just past that meant paper branded CCC. Most of this paper was trading below 50 cents on the dollar while the S&P was clicking off triple sixes and the postponement of Armageddon has done for these bonds what it did for stocks and as such yields came down as prices rose.
We’re back to even, or thereabouts, on the year if your yardstick is the S&P. So far, so fast both down and up it’s been like getting caught in a revolving door and winding up right back where you came from.
The question is where do we go from here?
Enjoy the week.
Jim Delaney
Labels: CDS, CEC Strategy, correlation, credit, cross asset, equity, Jim Delaney
posted by Jim Delaney at
4:02 AM
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