fw : market update just some color on the debt markets
- - - - - original message - - - - -
from : scott , david c [ mailto : david . c . scott @ bankofamerica . com ]
sent : friday , september 21 , 2001 7 : 53 am
subject : market update
market update
the market has opened with a weak tone this morning given the collapse in
equity futures - dow futures down 408 , s & p down 29 and nasdaq down 40 - and
the collapse of some recent new issues in the secondary market . ibm printed
a $ 1 . 5 bn five year yesterday at t + 117 that just traded at t + 130 . what is
leading the collapse in spreads ? bas has several observations :
* the absolute level of treasury yields will continue to result in new issue
supply that is priced at ever widening new issue premiums . most issuers are
more coupon sensitive than spread sensitive and , as a result , will be
willing to pay a large new issue concession given the attractive level of
overall coupons .
* although we have not seen it yet in the corporate bond market , an inverted
credit curve is not out of the question given the steepness of the treasury
curve . two and three year securities in particular , almost need to be
priced on a coupon basis .
* the technicals of the market are beginning to deteriorate . insurance
companies , traditionally the largest buyer of long assets , appetite for new
product may begin fade as claim estimates climb . balanced funds , may need
to begin selling to rebalance portfolios given the meltdown in the equity
market . the dealer community and the buyside is trying to hold on to market
gains for the year .
despite the negative tone , bas feels that issuers in the energy sector will
continue to have access to the primary market in the near - term ( albeit at
wider spreads ) due to the defensive nature of the sector and the absolute
implosion of other sectors ( autos , media , lodging , retail , airlines , etc ) .
please do not hesitate to call should you have any questions on the state of
the current marketplace .
david scott
banc of america securities llc
energy debt capital markets
p : 704 - 388 - 8853
f : 704 - 388 - 9212
email : david . c . scott @ bankofamerica . com
fw : market update
just some color on the debt markets
- - - - - original message - - - - -
from : scott , david c [ mailto : david . c . scott @ bankofamerica . com ]
sent : friday , september 21 , 2001 7 : 53 am
subject : market update
market update
the market has opened with a weak tone this morning given the collapse in
equity futures - dow futures down 408 , s & p down 29 and nasdaq down 40 - and
the collapse of some recent new issues in the secondary market . ibm printed
a $ 1 . 5 bn five year yesterday at t + 117 that just traded at t + 130 . what is
leading the collapse in spreads ? bas has several observations :
* the absolute level of treasury yields will continue to result in new issue
supply that is priced at ever widening new issue premiums . most issuers are
more coupon sensitive than spread sensitive and , as a result , will be
willing to pay a large new issue concession given the attractive level of
overall coupons .
* although we have not seen it yet in the corporate bond market , an inverted
credit curve is not out of the question given the steepness of the treasury
curve . two and three year securities in particular , almost need to be
priced on a coupon basis .
* the technicals of the market are beginning to deteriorate . insurance
companies , traditionally the largest buyer of long assets , appetite for new
product may begin fade as claim estimates climb . balanced funds , may need
to begin selling to rebalance portfolios given the meltdown in the equity
market . the dealer community and the buyside is trying to hold on to market
gains for the year .
despite the negative tone , bas feels that issuers in the energy sector will
continue to have access to the primary market in the near - term ( albeit at
wider spreads ) due to the defensive nature of the sector and the absolute
implosion of other sectors ( autos , media , lodging , retail , airlines , etc ) .
please do not hesitate to call should you have any questions on the state of
the current marketplace .
david scott
banc of america securities llc
energy debt capital markets
p : 704 - 388 - 8853
f : 704 - 388 - 9212
email : david . c . scott @ bankofamerica . com