So here are my thoughts… Volatility will continue to rise as investors try to hedge their positions and bid up the prices of options. The rise in volatility will cause… Desks that have been levering up in spread sectors of fixed income are going to see their VaR go up sharply due to the rise in volatility. Firm wide VaR increases will cause… Desks to be forced to pare their positions, so they will be offering cheap and bidding shitty and bid-ask will be wide so… The buyside will be reluctant to buy non-Treasuries as they are unsure their is a bid if they need liquidity so… Spreads will blow out again… So, credit will be unavailable to anyone and everyone… The grown ups in Europe really need to stand up.
“So, credit will be unavailable to anyone and everyone…” That’s the boldest statement I’ve ever heard.
Reggie Wrote: ------------------------------------------------------- > “So, credit will be unavailable to anyone and > everyone…” > > That’s the boldest statement I’ve ever heard. Considering it happened 2 years ago?
1morelevel Wrote: ------------------------------------------------------- > Reggie Wrote: > -------------------------------------------------- > ----- > > “So, credit will be unavailable to anyone and > > everyone…” > > > > That’s the boldest statement I’ve ever heard. > > > Considering it happened 2 years ago? I closed an auto loan and a home equity loan mid-2008 (march and june - both very favorably). Are you referring to a different 2008? I do think spreads will widen, and agree with some of the other stuff.
jcole21 Wrote: ------------------------------------------------------- > 1morelevel Wrote: > -------------------------------------------------- > ----- > > Reggie Wrote: > > > -------------------------------------------------- > > > ----- > > > “So, credit will be unavailable to anyone and > > > everyone…” > > > > > > That’s the boldest statement I’ve ever heard. > > > > > > Considering it happened 2 years ago? > > I closed an auto loan and a home equity loan > mid-2008 (march and june - both very favorably). > Are you referring to a different 2008? > > I do think spreads will widen, and agree with some > of the other stuff Unavailable = prohibitively expensive or on such onerous terms that prevent transactions and economic activity. If AAA auto ABS rates blow out to 800 bps and sustain there, how available are auto loans? This was the case in post Lehman when investment grade credit spreads blew out to 700 bps. When fortune 500 companies can’t borrow overnight money at a reasonable cost, credit is unavailable. I hope I’m wrong but this is starting to feel a little like deja vu. The action from the trading desk felt a lot like Lehman. Investment grade spreads blew out like 30 bps today. Trading was sloppy, and the desk was reluctant to commit balance sheet regardless of how cheap the bonds were. On the bright side, LIBOR seemed relatively stable which surprises me. LIBOR moved 1 bp. I have been expecting LIBOR to explode higher and have been surprised it hasn’t. If LIBOR explodes, T-Bills, guns and gold.
^commercial paper was the canary in the coalmine last time, right? How are those spreads looking?
Yeah I think it was just a one day glitch, I don’t think we can expect a disaster of epic proportions. But it all depends on how some of these European countries are able to manage their debt. Thanks for running my stock portfolio yesterday Greece/Spain/Portugal, never spending a tourist dime there anymore.
CP spreads are widening, but not like ABCP did in 2008. ING Group has really widened. So has Allied Irish and Skandi Ensk. I haven’t seen names like SocGen, BNP. I dont think the trading glitch had much to do with yesterday. Remember we still were down 340 points.