Wednesday Market Recap

Another day, another dollar (or two).  Equities better, short/intermediate treasuries better, credit better - its all good.

Fixed Income:

Secondary volume increased today in both IG and HY space.  Decliners lead advancers in IG space with a 0.87x ratio and the unstoppable HY advancers lead decliners by 1.55x.  WaMu had a decent gain on the news of the tax payment (see earlier post) and Harrahs had decent returns today as well.  All financials in the most active in the IG arena.

Decent new issue calendar today, with Raytheon leading the charge with $2B across 5s,10s and 30s - personally thought it was kinda tight.   Post Properties priced $150MM of 7yr paper at +300 - Decent value here, a nice steep credit curve.

From Bloomberg: Companies are selling debt that protects bondholders against credit-damaging mergers at a record pace as Blackstone Group LP, Bain Capital LLC and other buyout firms announce takeovers at the fastest rate since 2007.
Forty-five percent of bonds sold in the U.S. and Europe by investment-grade non-financial companies last quarter contained a so-called poison put, compared with 40 percent in the three months ended in June, according to data compiled by Bloomberg. Use of the provision, which lets investors sell debt back to the issuer at a premium in an acquisition, has doubled since 2008.The covenant they are talking about is the change of control covenant which requires the issuer to purchase the debt at $101 if there is a change of control that leads to non-investment grade ratings (gotta watch the verbiage in the COC - any of the agencies vs. each of the agencies for a downgrade below IG).  Funny, but the market doesn't seem to price in a premium for the covenant until the sh#t hits the fan, then look at the difference in Px - example is SLE where COC bonds came to rest around $101 while non-COC bonds got cracked around 20pts.

Story here: Bloomberg COC

Treasuries muted.  Rally still has legs though, IMHO.

Equities:

Energy, Materials and Industrials clear winners in the S&P500.

Interesting fact (from S&P):  Standard & Poor’s, the world’s leading index provider, announced today that of the approximately 7,000 publicly owned companies that report dividend information to Standard & Poor’s, only 35 decreased their dividend payment during the third quarter of 2010 marking a continued, dramatic improvement from the 135 that lowered their dividend payment during the third quarter of 2009.   Dividend increases rose 56.4% during the third quarter to 299 from the 191 recorded during the third quarter of 2009.  Year-to-date, 117 have decreased their dividend payment compared to 730 for the corresponding period last year, representing an 84% decline in negative news. 1033 issues have increased their rate so far this year, a 46% gain over the 707 issues that did so last year.

Howzabout a little growth vs Value?

 

Yeah, didn't surprise me either.

Little market cap action?

Difference between the two narrowed, but not enough to make me want to swap into small caps.

Currencies:

Another day, another kick in the teeth for the dollar (well deserved and policy intended).  The headines today: 

Canadian Dollar Climbs To New Multi-month Highs Against Greenback; 
Australian Dollar Jumps To New Multi-year High Against Greenback 
Dollar Plunges To Fresh 15-year Low Against Yen

Now, have I been saying to get a little loonie?  Go down under?

Errata:

AOL Inc. and several private-equity firms are exploring making an offer to buy Yahoo Inc., according to people familiar with the matter, devising a bold plan to marry two big Internet brands facing steep challenges.
Silver Lake Partners and Blackstone Group LP are among the firms that have expressed interest in teaming up with AOL to buy Yahoo or trying to take it private on their own, these people said. They added that at least two or three other firms could be interested in participating if a formal buyout proposal is drawn up.

The U.S. increased its crude-oil price forecast for 2011 by $1 a barrel on projections that global economic growth will lead to higher demand and that inventories in industrialized nations will decline.
West Texas Intermediate oil, the U.S. benchmark grade, will average $83 a barrel next year, up from a September forecast of $82, according to the Energy Department’s monthly Short-Term Energy Outlook. The estimate includes an assumption that OPEC will boost its output as prices rise, tempering a bigger gain.

Bottom line:  Short long treasuries (TBF), long intermediate treasuries (IEF), long corporate bonds (LQD), long midcap growth (IWP), long A$ (FXA), long loonie (FXC).  You want an equity market neutral strategy?  Short SPY (a long SH position), long IWP.  This is from a long-only viewpoint.  Thought I might want to start trying to put it in action.  THOUGHTS????

 Good luck, lets be careful out there.