Friday, April 15, 2005

"The End Of This Golden Age"

Many investors are puzzled over the sharp drop in housing related stocks this week. This FT.com article may have the answer. "Hopes for a recovery in the corporate bond market were crushed on Friday when a widespread sell-off took the market to its weakest level since August last year."

"The yield spread, or risk premium over government bonds, widened to its worst levels since August last year...the last time spreads were this wide was in October 2002. 'This reflects a shift in the balance of power between investors and borrowers.'"

"This time around it might well be that the auto spread weakness signals the end of this golden age and that we are at the beginning of the credit spread widening trend," said Gary Jenkins of Deutsche Bank.

4 Comments:

At 11:18 AM, Anonymous Anonymous said...

The widening of the yield spread is the straw that will break the housing camels back.

I've been preaching that the yield spread was wrong for months !

All it is going to take is 100 bp and the crash will start.

With the crash of the DOW this week, I believe that everything is set for the bubble to burst. Today is a historic day.

 
At 11:49 AM, Anonymous Anonymous said...

it has been a heck of a week. the HB are getting hit.

 
At 12:03 PM, Anonymous Anonymous said...

You ain't seen nothing yet ! There are going to be much, much harder weeks ahead. This is just the tip of the iceberg.

 
At 10:08 PM, Anonymous Billy The Kid said...

People are finally waking up and realizing that junk bonds are named that for a reason. I think the GM debacle is the alarm clock ringing and the average American investor is thinking, "Gee, maybe me gets more yield because me may not get money back. Me thinks maybe not so good deal after all."

The big concern for me is who will buy all that MBS paper. Investors and institutions can no longer trust what's in them. Kind of like mystery meat. The yield may taste good, but you may have a helluva stomach ache afterwards.

 

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