2002 was a bad year for Banco Santander: in the wake of economic crises in Argentina, Uruguay, and Brazil, the bank found itself with large Latin American losses and a desperate need for capital. So it ended up selling 25% of its Mexican subsidiary, Santander Serfin, to Bank of America. Now history is repeating itself, this time in Brazil.
Bespoke Investment Group serves up this chart:
It seems as though while the high-grade bond market has responded to increased demand with massive amounts of new issuance, the high-yield market — which is still pretty much closed to new issuance — has responded with lower spreads. That’s a much healthier response: it means that writers of credit protection might have now emerged from technical insolvency, while total leverage continues to fall as debts are paid down and little new debt is issued.
The chart comes from the Center for Responsible Lending:
According to Congressional testimony from CRL director Keith Ernst, the 1.5 million homes which have already been lost to foreclosure are just the tip of the iceberg compared to the 13 million total foreclosures expected over the five years from end-08 to 2014. He adds:
The high frequency trading (HFT) debate continues today, fueled by a rather credulous Bloomberg article (elegantly fisked by Ryan Chittum) but, more substantively, moved along by Jon Stokes, who has a good article on the subject at Ars Techica. I asked him, via email, where he stood on all these questions; I think his answers are very good. Essentially, HFT turns out to be one of those “financial innovations” which lots of people like in theory but which only seem to benefit financial-market professionals in practice. I, for one, don’t think that there’s $20 billion worth of net societal benefit to it. Anyway, here’s the Q&A with Jon:
John Malone is feeling bearish:
Mr Malone agreed with Mr Murdoch on the economy. “I think he is particularly bearish on the economy . . . I agree with him. I think this is going to be a long slog. There is just way too much debt in the west and we are starting to be borne down by that debt.”
The bond market is on fire right now: Treasury is selling $115 billion of notes this week, with the 10-year bond yielding a whopping 5.1 percentage points more than the inflation rate — the widest spread since 1994. Meanwhile, total corporate bond issuance in the first half of 2009 was an all-time high of $1.791 trillion — more than anything we saw during the boom. This is what it looks like when markets clear: bond investors are seeing attractive yields, bond issuers are seeing abundant liquidity, and there’s an enormous amount of pent-up demand for financing from the long wintry months when no deals could get done at all.