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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (88953)	10/22/2008 8:24:30 PM
From: KyrosL	Respond to of 116555

Muni market is also healing rapidly. Muni Prices Surge Amid Feeding Frenzy By STAN ROSENBERG NEW YORK -- Prices surged again in the U.S. municipal bond market Wednesday as investors ranging from individuals to large institutions like mutual funds staged a broadbased feeding frenzy for the second consecutive day. The higher prices enabled new issues to clear what had been a previously frozen market and reduced yields on existing high-grade bonds by from 10 to 20 basis points for bonds coming due in 10 years or less, and from 20 to 34 basis points in maturities out to 30 years. "We were extremely cheap and now are correcting with a vengeance," said Gary Pollack, head of fixed-income trading an research at Deutsche Bank Private Wealth Management in New York City. While the powerful rebound from a market that previously had been unable to bring new deals or to sell bonds in the resale, or secondary, market, reduced the advantage of holding high-grade municipals instead of Treasurys slightly, it wasn't enough to stop the chase for sovereign triple-A munis. A reduction in the ratio between the two types of securities at 30 years to 135.7% in favor of munis from 137.7% Tuesday kept tax-exempts attractive and didn't damp demand. In fact, it intensified it as investors who had sold 5% coupons Tuesday, hoping to pick up heftier ones Wednesday, couldn't find them and returned to bidding up prices for the 5s instead. "It was a chasing mentality," said Evan Rourke, a portfolio manager at MD Sass Associates in New York City. "We went from a market where we couldn't find a bid -- there was just no liquidity -- to people who were willing to pay up for long bonds' through the prices at which they were being offered. A major example was Wednesday's sale of $500 million Connecticut general obligation bonds, debt that's backed by the Nutmeg State's full taxing powers and which is rated "Aa3" by Moody's Investors Service and "AA" by Standard & Poor's and Fitch Ratings. The issue's size was doubled from original plans, and preliminary coupons and yields were cut dramatically. The longest 5.25% coupons in 2027 and 2028 were dropped to 5%, and yields plunged to 5.18% and 5.23%, respectively, from the 5.40% and 5.45% first floated in the marketplace. The issue, sold via a Siebert Brandford Shank & Co. group, was well placed nonetheless. With the tax-exempt bond market still facing a huge calendar of $19.1 billion in debt over the next 30 days, the current rally was welcomed by traders who now see an improving market that could allow the floodgates to open for anxious borrowers. That $19.1 billion is just shy of this year's $19.9 billion high set in early March, and it's a sure bet there are still many unannounced deals in the pipeline. online.wsj.com

To: John Pitera who wrote (88953)	10/22/2008 10:23:10 PM
From: ajtj99	Read Replies (3) \| Respond to of 116555

Ted Spread of 2.50 is still very high the past year. I can't recall ever having it before this summer. It's coming down, which is good, but we have a ways to go yet before we're out of the woods on the Ted Spread. It needs to get under 1.0 Tomorrow they settle the WaMu Credit Default Swaps. I believe that's the last biggie.

To: John Pitera who wrote (88953)	10/22/2008 11:43:03 PM
From: Killswitch	1 Recommendation Respond to of 116555

The highest rated commercial paper may have improved slightly, but really what is happening here is the market is weeding out a few "winners" but moving the vast majority of companies into the "losers" basket. And the losers basket still has incredibly high interest rates to pay if it wants a little dribble of credit. As you can see here, the 30-day rates on "A2/P2" CP are still incredibly higher compared to "AA": federalreserve.gov See the second chart on that page for a graphical representation of the difference between the "good" and "bad" baskets. That statistic has not improved. Also junk bond yields are still super-high, see for instance the JNK etf. And here's another report from an expert corporate bond market participant: acrossthecurve.com "market which is bleeding from its various orifices" There has been no improvement in getting new bond offerings out. The few that have priced like PepsiCo priced at ridiculously high interest rates. And weaker companies have zero shot at issuing.