Global Credit Market Dislocation

[Tourette Dude]

Global Credit Market Dislocation Watch:

February 29 – Bloomberg (Abigail Moses): “Credit markets headed for the worst two months on record amid investor concern that mounting losses on securities linked to home loans will trigger bank failures, according to traders of credit-default swaps. Contracts on the benchmark Markit iTraxx Europe index jumped 14.25 basis points to 127.5… more than double the 50 basis points at the start of the year… The CDX North America Investment Grade index rose the most in one day yesterday, soaring 14.5 to 153.5.”

February 29 – Bloomberg (Abigail Moses): “Financial firms are likely to face at least $600 billion of losses from the financial crisis, UBS AG analysts said… Financial institutions have written down or lost about $160 billion so far.”

February 29 – Bloomberg (Hugh Son): “American International Group Inc. said the head of its financial products unit, Joseph Cassano, is stepping down after the insurer reported $11.1 billion in losses on contracts sold to fixed-income investors. Cassano co-founded the unit in 1987 and built it into a business providing financial guarantees on more than $500 billion of assets at year-end, including $61.4 billion in securities tied to subprime mortgages.”

February 29 – MarketWatch (Alistair Barr): “Hedge funds that trade municipal bonds have been hit by margin calls in recent days and some are having to sell positions to meet those obligations, according to a leading investor in the market… The disruptions have encouraged banks and brokers that lend money to muni hedge funds to pullback and impose more margin calls… ‘The market is in further disarray the last two days as a number of muni hedge funds are being forced to liquidate to meet margin calls,’ Mark McCray, head of muni bonds at Pimco, said. ‘The widening of munis versus Treasurys has been a negative and broker dealers have upped their margin requirements for hedge funds. As such these funds are trying to liquidate into this illiquidity.’”

February 29 – Bloomberg (Jeremy R. Cooke): “U.S. municipal bonds are headed for their worst month in more than four years after collapsing demand for securities with rates set at periodic auctions sent debt costs for state taxpayers and hospitals as high as 20%... State and local government bonds fell 4.17% through yesterday…”

February 28 – Bloomberg (Michael Quint): “Local government officials from New York to Houston who followed the advice of their bankers and issued auction-rate bonds in combination with interest-rate swaps are now getting squeezed by both. States, cities and hospitals across the country expected yields on the debt to move in tandem with benchmark rates when they bought swaps to protect against rising interest costs. Instead, the bonds' rates are up an average 3.1 percentage points since September, while the one-month London interbank offered rate -- what banks charge each other for funds -- has dropped 2.7 points. ‘It’s a universal problem,’ said Debra Sloan, director of capital markets at…Partners Healthcare System Inc., which has interest-rate swaps on $450 million of its $600 million in auction securities. ‘We try to structure them so that over time there is a match.’ The failure of the financial instruments compounds the pain for borrowers stuck paying record-high interest on auction-rate debt billed as a cheap alternative to traditional bonds.”

February 28 – Bloomberg (Michael McDonald and Michael Quint): “U.S. state and local governments are paying more for their variable-rate bonds as disruptions that first appeared in the market for auction-rate securities widen. The benchmark weekly interest rate that tax-exempt issuers pay more than doubled in the past two weeks as investor demand waned on skepticism about the finances of insurers backing the debt. The Wall Street dealers who help to find buyers for so- called variable-rate demand obligations have also refused to hold the debt when they can’t attract investors, mirroring the breakdown of the auction market, investors and issuers said. ‘The variable-rate demand market worked fine as long as everybody was confident that at the end of the day somebody would open their checkbook and buy the bonds,’ said Lance Pan, director of investment research at Capital Advisors Group….”

February 29 – Bloomberg (Shannon D. Harrington): “MBIA Inc. is writing ‘very little’ new bond insurance business as borrowers balk at buying a guarantee from a money-losing company without stable AAA credit ratings.”

February 29 – Bloomberg (Emma Moody): “Ambac Financial Group Inc., seeking to avoid a crippling credit rating downgrade, cut its dividend and will suspend writing guarantees on new asset-backed securities for six months to bolster capital.”

February 28 – Financial Times (James Mackintosh): “One of London’s most successful hedge funds imploded Thursday when Peloton Partners put the assets of its $2bn flagship fund up for sale and froze its remaining fund after geared mortgage bets left it unable to meet lenders’ demands. Rumours of the crisis at Peloton’s ABS fund, named best new fixed-income hedge fund last month, helped drive the high-quality mortgages in which it was invested to all-time lows this week as traders prepared for $9bn of assets to be dumped. The losses are particularly striking because Peloton ABS was one of the big winners from the US subprime crisis, gaining 87% last year after betting against low-quality mortgages. But last month Ron Beller, co-founder, told the Financial Times that the firm had begun investing in ‘good-quality assets that are trading at deeply discounted prices’ – including a large position in AAA-rated mortgages… ‘It is the classic story of when leverage goes wrong,’ one investor said. ‘But I can’t believe this problem is confined to these guys alone.’”

February 29 – Bloomberg (Pierre Paulden and Caroline Salas): “Peloton Partners LLP, the London- based hedge fund manager being forced to liquidate a $1.8 billion asset-backed fund, said it’s a victim of Wall Street's reduced lending. ‘Credit providers have been severely tightening terms without regard to the creditworthiness or track record of individual firms, which has compounded our difficulties and made it impossible to meet margin calls,’ Peloton co-founders Ron Beller and Geoff Grant said in a letter yesterday to clients.”


February 28 – Bloomberg (Jody Shenn): “Securities backed by Alt-A mortgages and other home loans to borrowers with better-than-subprime credit tumbled this month, causing investment funds to unwind or meet margin calls and signaling larger losses for Wall Street… Valuations for AAA rated securities backed by Alt-A loans, deemed between prime and subprime in terms of expected defaults, slumped 10% to 15% this month, partly because it's so difficult to trade or find prices for them, Thornburg Mortgage… said… ‘There really hasn’t been an orderly two-sided market in 2008,’ Arthur Frank, a mortgage-bond analyst…at Deutsche Bank AG, said…”

February 26 – Dow Jones (Mark Brown): “Two years after the so-called ‘correlation crisis’ hit trading in credit derivatives, bankers fear that a second crisis is brewing as correlation hits fresh highs. Correlation describes the likely pattern of defaults that some credit market participants anticipate. High correlation means markets are expecting a broad-based or ‘systemic’ deterioration in credit conditions. When correlation is low, credit risk is ‘idiosyncratic,’ meaning default risk is seen as focused on specific companies or sectors. Correlation is driven up or down by investors who trade different slices, or tranches, of credit default swap indexes.”

February 23 – The Oregonian (Jeff Manning): “Local cities, ports, hospital chains and colleges face significantly higher interest payments on some of their outstanding debt, another impact of the national mortgage bust that continues to bruise the U.S. economy. The city of Portland, the Port of Portland, Oregon Health & Science University, Reed and Lewis & Clark colleges and PeaceHealth, the hospital chain…combined hold a total of more than $1 billion in outstanding debt on so-called auction rate bonds… ‘Investors have just lost confidence in the whole market,’ said Ed McFarlane, Reed's treasurer.”

February 27 – Bloomberg (Adam L. Cataldo): “The Pennsylvania Higher Education Assistance Agency will stop making loans next month because of increasing interest costs paid on auction-rate bonds. The agency services and buys existing obligations and makes about $500 million in new loans annually, said chief financial officer Tim Guenther. Officials, who made 140,000 student loans in the 12 months through June 30, said they will halt making new ones on March 7. ‘The decision was taken because with the auction rates resetting where they are, bringing on new loans is a guaranteed loss at this time,’ Guenther said. ‘Basically, since Feb. 13 every auction has failed.’”

February 27 – Financial Times (Joanna Chung): “Yields on bonds issued by eurozone governments are diverging more widely than at any time since the 1999 creation of the euro, a stark sign that the global credit crisis is infecting sentiment in traditionally safe European sovereign debt markets. The development is being fuelled by investors who have been shunning bonds considered more risky and instead buying those of Germany - the region's largest and most liquid market. The result is that governments whose bonds trade in smaller, less-liquid markets have to pay higher risk premiums to sell their bonds than they did before, threatening to push up the cost of borrowing for some governments.”


http://www.prudentbear.com/index.php...leBulletinHome



I heard the phrase "15 minutes to midnight" back in October.

Seems more like 2 minutes now.

[mud]

And the Beige Book says...

[Cliff Huckable]

February 29 – Bloomberg (Abigail Moses): “Credit markets headed for the worst two months on record amid investor concern that mounting losses on securities linked to home loans will trigger bank failures, according to traders of credit-default swaps. Contracts on the benchmark Markit iTraxx Europe index jumped 14.25 basis points to 127.5… more than double the 50 basis points at the start of the year… The CDX North America Investment Grade index rose the most in one day yesterday, soaring 14.5 to 153.5.”

February 29 – Bloomberg (Abigail Moses): “Financial firms are likely to face at least $600 billion of losses from the financial crisis, UBS AG analysts said… Financial institutions have written down or lost about $160 billion so far.”

February 29 – Bloomberg (Hugh Son): “American International Group Inc. said the head of its financial products unit, Joseph Cassano, is stepping down after the insurer reported $11.1 billion in losses on contracts sold to fixed-income investors. Cassano co-founded the unit in 1987 and built it into a business providing financial guarantees on more than $500 billion of assets at year-end, including $61.4 billion in securities tied to subprime mortgages.”

February 29 – MarketWatch (Alistair Barr): “Hedge funds that trade municipal bonds have been hit by margin calls in recent days and some are having to sell positions to meet those obligations, according to a leading investor in the market… The disruptions have encouraged banks and brokers that lend money to muni hedge funds to pullback and impose more margin calls… ‘The market is in further disarray the last two days as a number of muni hedge funds are being forced to liquidate to meet margin calls,’ Mark McCray, head of muni bonds at Pimco, said. ‘The widening of munis versus Treasurys has been a negative and broker dealers have upped their margin requirements for hedge funds. As such these funds are trying to liquidate into this illiquidity.’”

February 29 – Bloomberg (Jeremy R. Cooke): “U.S. municipal bonds are headed for their worst month in more than four years after collapsing demand for securities with rates set at periodic auctions sent debt costs for state taxpayers and hospitals as high as 20%... State and local government bonds fell 4.17% through yesterday…”

February 28 – Bloomberg (Michael Quint): “Local government officials from New York to Houston who followed the advice of their bankers and issued auction-rate bonds in combination with interest-rate swaps are now getting squeezed by both. States, cities and hospitals across the country expected yields on the debt to move in tandem with benchmark rates when they bought swaps to protect against rising interest costs. Instead, the bonds' rates are up an average 3.1 percentage points since September, while the one-month London interbank offered rate -- what banks charge each other for funds -- has dropped 2.7 points. ‘It’s a universal problem,’ said Debra Sloan, director of capital markets at…Partners Healthcare System Inc., which has interest-rate swaps on $450 million of its $600 million in auction securities. ‘We try to structure them so that over time there is a match.’ The failure of the financial instruments compounds the pain for borrowers stuck paying record-high interest on auction-rate debt billed as a cheap alternative to traditional bonds.”

February 28 – Bloomberg (Michael McDonald and Michael Quint): “U.S. state and local governments are paying more for their variable-rate bonds as disruptions that first appeared in the market for auction-rate securities widen. The benchmark weekly interest rate that tax-exempt issuers pay more than doubled in the past two weeks as investor demand waned on skepticism about the finances of insurers backing the debt. The Wall Street dealers who help to find buyers for so- called variable-rate demand obligations have also refused to hold the debt when they can’t attract investors, mirroring the breakdown of the auction market, investors and issuers said. ‘The variable-rate demand market worked fine as long as everybody was confident that at the end of the day somebody would open their checkbook and buy the bonds,’ said Lance Pan, director of investment research at Capital Advisors Group….”

February 29 – Bloomberg (Shannon D. Harrington): “MBIA Inc. is writing ‘very little’ new bond insurance business as borrowers balk at buying a guarantee from a money-losing company without stable AAA credit ratings.”

February 29 – Bloomberg (Emma Moody): “Ambac Financial Group Inc., seeking to avoid a crippling credit rating downgrade, cut its dividend and will suspend writing guarantees on new asset-backed securities for six months to bolster capital.”

February 28 – Financial Times (James Mackintosh): “One of London’s most successful hedge funds imploded Thursday when Peloton Partners put the assets of its $2bn flagship fund up for sale and froze its remaining fund after geared mortgage bets left it unable to meet lenders’ demands. Rumours of the crisis at Peloton’s ABS fund, named best new fixed-income hedge fund last month, helped drive the high-quality mortgages in which it was invested to all-time lows this week as traders prepared for $9bn of assets to be dumped. The losses are particularly striking because Peloton ABS was one of the big winners from the US subprime crisis, gaining 87% last year after betting against low-quality mortgages. But last month Ron Beller, co-founder, told the Financial Times that the firm had begun investing in ‘good-quality assets that are trading at deeply discounted prices’ – including a large position in AAA-rated mortgages… ‘It is the classic story of when leverage goes wrong,’ one investor said. ‘But I can’t believe this problem is confined to these guys alone.’”

February 29 – Bloomberg (Pierre Paulden and Caroline Salas): “Peloton Partners LLP, the London- based hedge fund manager being forced to liquidate a $1.8 billion asset-backed fund, said it’s a victim of Wall Street's reduced lending. ‘Credit providers have been severely tightening terms without regard to the creditworthiness or track record of individual firms, which has compounded our difficulties and made it impossible to meet margin calls,’ Peloton co-founders Ron Beller and Geoff Grant said in a letter yesterday to clients.”

February 28 – Bloomberg (Jody Shenn): “Securities backed by Alt-A mortgages and other home loans to borrowers with better-than-subprime credit tumbled this month, causing investment funds to unwind or meet margin calls and signaling larger losses for Wall Street… Valuations for AAA rated securities backed by Alt-A loans, deemed between prime and subprime in terms of expected defaults, slumped 10% to 15% this month, partly because it's so difficult to trade or find prices for them, Thornburg Mortgage… said… ‘There really hasn’t been an orderly two-sided market in 2008,’ Arthur Frank, a mortgage-bond analyst…at Deutsche Bank AG, said…”

February 26 – Dow Jones (Mark Brown): “Two years after the so-called ‘correlation crisis’ hit trading in credit derivatives, bankers fear that a second crisis is brewing as correlation hits fresh highs. Correlation describes the likely pattern of defaults that some credit market participants anticipate. High correlation means markets are expecting a broad-based or ‘systemic’ deterioration in credit conditions. When correlation is low, credit risk is ‘idiosyncratic,’ meaning default risk is seen as focused on specific companies or sectors. Correlation is driven up or down by investors who trade different slices, or tranches, of credit default swap indexes.”

February 23 – The Oregonian (Jeff Manning): “Local cities, ports, hospital chains and colleges face significantly higher interest payments on some of their outstanding debt, another impact of the national mortgage bust that continues to bruise the U.S. economy. The city of Portland, the Port of Portland, Oregon Health & Science University, Reed and Lewis & Clark colleges and PeaceHealth, the hospital chain…combined hold a total of more than $1 billion in outstanding debt on so-called auction rate bonds… ‘Investors have just lost confidence in the whole market,’ said Ed McFarlane, Reed's treasurer.”

February 27 – Bloomberg (Adam L. Cataldo): “The Pennsylvania Higher Education Assistance Agency will stop making loans next month because of increasing interest costs paid on auction-rate bonds. The agency services and buys existing obligations and makes about $500 million in new loans annually, said chief financial officer Tim Guenther. Officials, who made 140,000 student loans in the 12 months through June 30, said they will halt making new ones on March 7. ‘The decision was taken because with the auction rates resetting where they are, bringing on new loans is a guaranteed loss at this time,’ Guenther said. ‘Basically, since Feb. 13 every auction has failed.’”

February 27 – Financial Times (Joanna Chung): “Yields on bonds issued by eurozone governments are diverging more widely than at any time since the 1999 creation of the euro, a stark sign that the global credit crisis is infecting sentiment in traditionally safe European sovereign debt markets. The development is being fuelled by investors who have been shunning bonds considered more risky and instead buying those of Germany - the region's largest and most liquid market. The result is that governments whose bonds trade in smaller, less-liquid markets have to pay higher risk premiums to sell their bonds than they did before, threatening to push up the cost of borrowing for some governments.”

Easier to read.

[yonskion]

Why do you keep making me post this everyday..
www.ml-implode.com this is the complete written history of the Credit / Housing mess! not just the last few days... since January of 07' this Blog has posted every bit of information release in all media forms. put it in your favorites!
then we can leave this forum to the Fun in the World and the Asshole's who kill puppies seriously, this is a serious threat!! much more than national security, "it's the Economy stupid"

[pointedem]

Good time to take advantage of it. Short the USD.

[mud]

Record today of $1.53 versus the euro.

I wonder what it will look like in July at this pace.

[Albert Gore]

it's not gonna matter one fucking bit because we'll all be under a boiling sea of water by then! Fuck, the dollar, the economy, none of this means shit unless we stop GLOBAL WARMINGS!






but in the meantime, please buy my carbon credits, my cash holdings are quickly devaluating.

[pointedem]

1.54013 EUR vs. 1 USD.

All time USD low.