An interview with Mark Bamford of Barclays Capital with his opinion after corporate bonds outperform stocks and treasuries. (Bloomberg News – running time 3:30 minutes)
Money quote…. “there is a move by industrial (issuers) away from the short term funding… CP and money markets…. to the term markets…”
There was very large issuance in the non-financial corporate debt markets in the first quarter. Rates were low for issuers and spreads to Treasuries were very wide for investors. What I find interesting is that issuers with relatively transparent capital structures are able to access the credit markets in size… demand by investors for debt securities from issuers who they believe the financials for is substantial…
Financial firms, who have enormous wholesale funding needs, must rely on guarantees and funding from the government because investors don’t trust them as borrowers… their capital structures are full of structured products, loans and securities which are marked at the issuers discretion (Level 3)… and with FASB loosening “mark-to-market” rules tomorrow obfuscation will increase for financial issuers… and investors will have less confidence in the “too-big-to-fail” banks…
It’s getting colder in the top tier of the banking business… zombism is creeping closer… I think those who make the decisions for our nation will look back and regret these actions… ossifying a few, unhealthy global money center banks as the linchpin of our economic system is the Japanese model… it’s transparency that’s wanted… the industrials prove the case…
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