The Yielder.

My Job...Building Carry and creating alpha on HY & EM Corporate bonds at the right time for a hedge fund....After that, it's people, places and things....

[theyielder]

Jan16th Good Morning

High Yield News of the day : - Key Market Data - ALCATEL-LUCENT reduces planned job cuts in France ALCATEL-LUCENT: industrial partnership with Altran CODERE to miss bond coupon payment EQUINITI: new CEO announced LECTA: S&P downgrades to 'B'; outlook stable SAPPI: CEO Ralph Boettger to resign TELECOM ITALIA: CEO rumoured to be backing limiting Telco power on board

Market Brief

US MArket Closed Higher, printing fresh record helped by World Bank GDP Growth forecast, volume were still on the light side @ 704mil shares...VIX @ 12.28 unchanged...SKEW @ 132.69 -0.55%, Cyclical were leading the move, Tech was helped by big names (AAPL,...)...Brazil+0.81%...BOJ Kuroda said the central bank will continue easing until 2% inflation is stable. Separately, Japanese press speculated the cabinet office will raise its economic assessment for the first time in 4 months...Nikkei -0.40%...Fitch: Japan external deficits highlights fiscal risks...China MOFCOM warned 2014 may bring "severe challenges" in the trade sector, since global recovery has not stabilized. Higher costs, liquidity shortages, base effects and competition were specifically attributed to expectations of a choppy trade activity in Q1...Shanghai +0.05%...Australia employment fell by the biggest amount in 9-months. Unemployment rate remained unchanged at 5.8% but only because of declining participation rate, which fell 2bps to 64.6% - a 7-year low. Decline in employment effectively brings back the possibility of further RBA easing, particularly a some of the more recent housing data show signs of deceleration.

[theyielder]

Veni Vidi Vici

Ok, so, lots of things happened yesterday, just like eating a big meal, the market is only starting to digest. 

First and foremost, Mr Bernanke had his run again at the market, mixed messages were sent, Stepping back and forth into it like a Tango dancer.

Recap: Fed Policy likely to continue Support long term interest rates, Mortgage  Market & Assure Financial Conditions Remain Accommodative

Make of it what you understand, on my end, I believe QE is not ending anytime soon. 

On other fronts, Greek Parliament has approved the vote the will bring on more austerity but also allow to release International Funds, let's look at GGB evolving over the next few days. 

Fitch Downgrades SocGen, Agricole, BPCE following the French Sovereign Downgrade. 

 IMF Calls for U.K. Credit Measures as BOE Stimulus Loses Power

Australia retains AAA (S&P)

High Yield Credit indices Squeezing 1.37% dod and 0.7% for IG indices

We also noticed a 2% Squeeze on USD Emerging Market as a response to Bernanke's statements. Although I don't believe the Risk is fully back on, this is a positive sign that investors are getting a bit more confident in the market... 

I remain Bid on.

[theyielder]

AlgoValue, Valuation Made Easy

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[theyielder]

QE not over just yet

Ben Bernanke is still speaking… In concise words, QE is not tapering yet, and so it seems through this speech, the Fed will remain “accommodative" as Unemployment is still too high, inflation far from targets predicted, and growth not evolving as swiftly as expected.

The FOMC minutes released earlier did mention “many" members were in favour of not tapering the QE until concrete figures that the economy has significantly improved.

This is actually quite a good news for the high yield credit market, we can expect a positive response from the markets tomorrow, especially looking at EM names.

Chairman Bernanke doesn’t look like he’s going to announce any kind of short term interest rates in 2013 nor taper the QE before Q4 now pending GDP, unemployment and inflation reports.

[a-chart-addict]

[theyielder]

Like Technical Chart trading, this is the guy to go to...

[theyielder]

Ready to Tumble?

Today is a big day, Big Ben is going to speak...

Remember last time we saw him? The Infamous "Tapering" Talk announcement. Now, let's not get too hasty. We don't believe the tapering will begin as soon as July even though tonight's minutes may reveal that some present at the meeting would have rather liked to see the tapering start in June already, we still believe believe the slowdown in purchases will be more likely to occur in September, after we see what GDP revisions have to show for...

FOMC Minutes release 2 pm Eastern Time followed at the market close by Ben Bernanke's press conference

[theyielder]

Italy downgraded by S&P

Italy LT ratings cut to BBB by S&P - Outlook negative Following recent pressure on the European politic environment, and the lengthy transition of the Italian government, it has made fiscal policies and growth measures lag. However this should not affect the medium term outlook on Italian bonds as the market has already priced most of it in. Look at telecom italia, italcimenti, and fiat, coming with a new issue with a 5y mat with guidance north of 6%

[theyielder]

Market Squeezing

More details coming soon...Focus on Italy, Spain, Portugal....

[theyielder]

Feta on the House

Greece wins release of aid, stays lashed to tight conditions; European governments agreed to release 3 billion euros ($3.9 billion) of aid for Greece, seeking to buy enough financial calm to prevent another debt- crisis showdown until after Germany’s elections in September. Greece will get 2.5 billion euros this month and the rest in October, as long as Prime Minister Antonis Samaras’s  coalition delivers on economic reforms and keeps cutting spending. Greece can also count on recouping 2 billion euros in central bank profits on Greek bonds and on 1.8 billion euros from the International Monetary Fund.

  WATCH: GGB bonds are up 8% this Morning on the news, We believe it is only a start, and target is now set 20-25% Higher on a strip trade.

[theyielder]

What happens in China, stays in China

The Chinese Equity markets held up well (HSI +0.3% CSI Flat) and up slightly on the day following CPI  data (2.7% vs 2.5% Concensus). However, we are starting to see some dislocations especially in the Ordos Region in Mongolia, where the District Government has been obligated to borrow of local businesses to pay off Municipal employees salaries. Sources show current Dbt for the Regional Body are north of  CNY240 Bln vs CNY 37.5 Bln revenue in 2012. The Government's response to such situations will definitely set an example as "Ghost Cities" are starting to appear in areas where industrial booms were artificially created to attract countryside populations into towns.

[theyielder]

Looking at the 5Y Xover CDS, We can see that the tapering talks have struck a reversal throughout the month of June moving away from a previously strong resistance at 360. Technical Analysis suggests an easing period towards 360 over the next month followed by a rebound with medium term target at 500 by Sept 13

[theyielder]

Get your Tier 1 While you still can

Over the last few days, we have observed a rise in interest from fast players in the market for Tier 1 Financial Securities. This sudden rush towards these usually "riskier" financial securities is mainly due to the fact that not being eligible as Tier 2 Capital, It will make sense for calls on T1 to be exercised.

Focus needs to be on Securities with a shorter term call date, preferably before 2016, Preferred Issuers include Barclays, Lloyds, Societe Generale, Deutsche Bank, KBC.