Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (4226)	12/31/2003 4:08:19 PM
From: ild	Respond to of 110194

Federal agency debt issuance tops $1 trln in 2003 Wednesday December 31, 1:40 pm ET By Lynn Adler (Adds U.S. agency underwriting, analyst comments, byline) NEW YORK, Dec 31 (Reuters) - Issuance of all federal credit agency debt raced past the $1 trillion milestone in 2003, fueled by the lowest interest rates in four decades, according to Thomson Financial. Issuance jumped 29 percent to $1.19 trillion this year from $922.9 billion last year. Driving overall issuance was a torrent of bond calls and redemptions that spurred the agencies -- such as Fannie Mae (NYSE:FNM - News), Freddie Mac (NYSE:FRE - News) and the Federal Home Loan Banks -- to sell new debt to replace the higher-yielding retired debt. All callable federal credit agency debt surged 37 percent percent this year to $863.8 billion from $629.8 billion in 2002, Thomson said. Deutsche Bank AG (XETRA:DBKGn.DE - News) was the top underwriter of all agency debt, and came in second place to First Tennessee Bank, a unit of First Tennessee National Corp. (NYSE:FTN - News), in underwriting callable debt, Thomson said. Overall, Deutsche ran the books on 432 issues totaling $101.97 billion to garner an 8.6 percent market share. "The powerful refinancing wave and subsequent reissuance of callables caused by falling Treasury yields propelled gross issuance to a record level," Citigroup Global Markets, said in a recent report. "We had expected issuance to drop to $630 billion in 2003, but then we did not expect Treasury yields to plunge to levels last seen in the Kennedy administration." Deutsche Bank was also lead underwriter of U.S. agency debt, managing 117 issues worth $45.5 billion and a 12.3 percent share of the market, according to Thomson. U.S. issuance reached $368.8 billion, up from $332.4 billion last year. These figures exclude callables and other very short-term debt. Whether issuance will sustain its torrid pace in 2004 hinges on the path interest rates take as the U.S. economy mends. "If rates back up substantially then I would expect there would be less callable issuance because of redemptions, but as rates back up I would think there should be better opportunities for the agencies to grow their portfolios and that may help increase the issuance numbers," said Beth Hammack, head of the agency desk at Goldman Sachs & Co. Banks could play a leading role in the 2004 supply picture for agency securities. "Bank holdings (of mortgage-backed securities) are at all-time highs from what we've seen," Hammack said. "To the extent that the market backs up, and there are better opportunities in the commercial and industrial loan business, banks should will probably shift out of MBS and back into that core business, which would mean likely selling of mortgage product by banks and probably better opportunities for the agencies to add to their portfolios," she added. "Higher growth for their portfolios should mean bigger (agency debt)issuance." The government-sponsored U.S. home financiers, also known as GSEs, sell agency debt to fund their mortgage asset purchases. If rates rise substantially, as Merrill Lynch strategists predict, banks may liquidate some of their mortgage securities holdings next year, Merrill said in a recent report. Near-term retained portfolio growth should be muted, Merrill said, but "the GSEs will stand willing and ready to grow their portfolios at a brisk pace ... a few strong quarters is all it takes for the GSEs to post full-year growth rates in the teens." Merrill stood in second place as underwriter of all federal credit agency debt with a 7.1 percent market share, followed by Citigroup in third with a 7 percent market share, Thomson said.

To: russwinter who wrote (4226)	12/31/2003 4:13:11 PM
From: Silver Super Bull	Respond to of 110194

Russ, I totally agree with your points. My view of the general stock market is that it has basically been a speculative blowoff, liquidity-driven, since March. I have been amazed at how crappy the technicals have been (especially since September) vs. the price action. By far I think going forward two of the factors you pointed out (the liquidity and interest rates) will be the primary driving factors. Although this stock market rally looks extremely overextended, I wouldn't rule out a final blowoff to a maximum level of around 1180 on the S&P 500. If this were to occur it would be a huge double top with early 2002. But in my opinion it is difficult to forecast, because the liquidity is such a huge (and unpredictable) issue. DB