just in in-tray, indicating bailing time soon enough
player #1
That was certainly one ugly last 15 minutes today -- I don't see anything obvious on the wires but the bids just disappeared -- something happen?
player #2
yes, Fannie sold $3 bn. in 2 year notes and had to pay a record high spread over treasuries to find enough buyers. this seems to have reignited fears over the GSEs, and with them, the entire financial system. it's always possible that a strongly oversold market fails to bounce when some grave new development becomes widely perceived just as sentiment is at its most fragile - then liquidity can disappear very fast.
further of note, according to Ben Seddacca, Zions failed to sell $200m. in prefs at 11% (!) , and only managed to sell $47m. - this indicates that the refinancing window for banks is closing down. so it's possible that a new chapter in the credit crisis is beginning here...note also the continued enormous deterioration in GM's debt (spread example attached), which harbors a certain degree credit derivatives meltdown danger. note in this context that GM's debt represents the biggest slice of the junk bond market by far. its debt is so vast, entire nations have been sunk by less (Argentina for example). so the market is rightly concerned, and everybody keeps scrambling for liquidity.
further to what was discussed previously, as odd as that may appear, there is STILL no true fear in this market. the options indicators that are most sensitive in this regard show mild (and growing) concern, but we have nothing that can be confidently termed a sign of panic ( leaving aside the fact that some share prices are falling like rocks). this still means what it has always meant - namely that we must expect these signs of panic to become evident at some future point - either after an intervening bounce, or right away. the timing of this presumably depends on how the GSE/GM situations develop in the near term. yesterday some soothing remarks by OFHEO brought about a bit of short covering in the GSE's, but the debt auction has reignited the concerns. furthermore, also via Seddacca, there are tons of asset backed securities of all stripes for sale , with no bids forthcoming. this is to say, there are troubled banks that urgently want to get rid of all sorts of paper, but there's no market for it - essentially the same situation as previously, only magnified, as those lists of securities for sale get longer by the day. my guess is a truck-load of those will eventually find its way unto the balance sheet of the Fed, disfiguring it further. |
