Credit

AAA Bonds in ABX Fail Test for Investment Grade

By The Prince ⋅ March 12, 2008 ⋅ Post a comment

Check out this interactive chart from Bloomberg which looks at the 80 AAA bonds in the ABX. It compares the ratio of credit support to collateral at risk for these 80 bonds. It makes it pretty clear that 74 of 80 of these funds fail the test used by the ratings agency’s for investment grade [...]

Incentives Killed CDOs but CLOs Will Live

By The Prince ⋅ March 12, 2008 ⋅ 2 comments

An interesting article by Vipal Mongra, entitled "In death, afterlife,” appeared in The Deal on Monday predicting the future of Collateralized Debt Obligations (CDOs). In the article, Messieur Mongra speculates how CDOs may fare in comparison to other products/strategies that were pronounced dead only to rise again from the ashes. Most notably, the article points [...]

Fed Announces Moves to Put Band-Aid on Broken Credit Markets

By The Prince ⋅ March 11, 2008 ⋅ Post a comment

11 Mar 2008 - The Fed announced this morning that is was taking more steps to ease the credit crunch. FT Alphaville announces here that "The credit market model is broken and must be fixed.” The Federal Reserve ramped up efforts to provide more relief in a coordinated action with other central banks aimed at [...]

Fed Needs to Buy Agency Mortgage Bonds

By The Prince ⋅ March 10, 2008 ⋅ Post a comment

10 Feb 2008 - In the latest sign of how broken the credit markets are, PIMCO’s Scott Simon is calling for the Federal Reserve to go into the market and purchase agency backed mortgage bonds. To get a sense of how bad things are in the Agencys market take a look at this earlier Bloomberg [...]

Is FICO a Good Metric for Originators?

By The Prince ⋅ March 6, 2008 ⋅ Post a comment

Richard Bitner recently released a book about the mortgage meltdown from the perspective of an originator of Mortgages. The book, entitled Greed, Fraud & Ignorance: A Subprime Insider’s Look at the Mortgage Collapse, gives investors some food for thought in considering the faults in the originate, securitize, and issue to investors chain that mortgages went [...]

The Municipal Bond Conversation Moves Forward

By The Prince ⋅ March 3, 2008 ⋅ Post a comment

3 Mar 2008 - Felix Salmon over at Market Movers on Portfolio.com has some interesting commentary on how municipal ratings between different firms diverge and some commentary on this NYT article this morning. Many thanks to Abnormal Returns for drawing attention to The Prince’s idea for how municipal bond issuers should respond to the current [...]

Munis Should Form Cooperative Entity to Self-Insure

By The Prince ⋅ March 3, 2008 ⋅ 9 comments

The Prince has been following the troubles of the bond insurance business for the last few weeks. Many thanks to Naked Capitalism, Alea Blog, and Information Arbitrage for their commentary to supplement The WSJ. It now appears that many of the largest monolines (bond insurers), if they are able to raise additional capital and follow [...]

CMBS Declines: Speculation or Fundamentals?

By The Prince ⋅ March 3, 2008 ⋅ Post a comment

2 Mar 2008 - Despite many professionals and many of his friends in structured finance telling The Prince that CMBS is a completely different animal than residential MBS, it apperars something is afoot. The Prince must have heard it a thousand times that the fundamentals, financing structures, and incentives in CMBS are more sound than [...]

Buy When There’s Blood in the Streets

By The Prince ⋅ February 27, 2008 ⋅ 2 comments

Baron Philippe de Rothschild, ever an opportunist, is said to have advised, “Buy when there’s blood in the streets.” Investors like Warren Buffett do just that all the time. Hedge funds have been set up specifically to take advantage of carnage in the markets. But for some inexplicable reason, many corporate C.E.O.’s can’t seem to [...]

More Trouble On PE Deals Ahead

By The Prince ⋅ February 25, 2008 ⋅ Post a comment

Now that the Alliance Data buyout is supposedly “back on" (after an attempted shutdown by Blackstone), some in the financial press might anticipate that future private equity buyouts will go more smoothly than the Alliance Data deal. It would be a mistake, however, to believe that other buyout deals have an easy road ahead. Many [...]

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