Monday, April 12, 2010

Zero Sanity

Why have prices started screaming up? Not just in AJs & AMs, that are getting some increased demand from folks who are loaded up on SSs, but also down in credit....

Delinquencies - All time high - above 7%
Office Vacancy - 16 year high
Beacon & Seattle - with the special

Where's the good news driving this?


R said...

remember all that money that was allocated to CMBS from TALF & PPIP? doesn't it stand to reason that if there is too much capital chasing a relatievely illiquid asset that, what does trade will trade a prices that are unsustainable as long as the leverage(gov't backed) is still adequate the spreads will stay in.

C said...

The stretch for yield. As money managers expand as other asset classes offer minimal yield upside. Same people who loaded up fall of 07 when they deemed paper cheap are at it again.

TALF not sure legacy program is over yet have rallied further since. PPIP not sure they have not been a big buyer in the near term as most of their $ has been into resi space.

All in all think its money managers who have expanded and driven spreads tighter.

THe sheer amount of money taken out of equity funds the past year had to go somewhere, people say oh bonds are safe let me transfer into thtat and voila fixed income funds get a huge amount of money to deploy.

At least thats my theory as fundamentals def do not justify price movement on a macro basis.

David said...

agree with the above but it would also seem that non-gov't financing/leverage has crept back into the picture in a fairly big way

C said...

If you look at money market outflows vs mutual fund outflows you see a massive amount of capital from the market bottom that transfered out of money markets and into taxable fixed income funds. Almost a 1 for 1 ratio