Tuesday, March 3, 2009

Pro HSBC: Corporate Bond Yield and AAA Banking and Finance Rate Rise

While we focus on HSBC, other figures may signal another wave of problems:

  1. Corporate Bond Yield, investment grade average = 7.38%, already up from 6.xx last month.

  2. 5-year AAA banking and finance rate = 5.91% up from 4.96% 1 month prior.

  3. 10-year AAA banking and finance rate = 6.76% up from 5.77% 1 month prior.

  4. 3-month TED rises to 1% after a month of contraction; 1-month UST even rose to 0.51%.

  5. While short-term UST price remains stable, long-term UST price has been dropping. UK, Germany, Australia, and Brazil all follow the same trend. (another hint about HSBC: except China and HK, most of its other major markets are suffering from confidence problems).

  6. CDS index of USD has been increasing to 170pts on average. The trend has been picking up on all sectors.

Meanwhile, mortgage rate in USA has still been stable and not subjected to large fluctuation.

Gold price is 926.70USD/ounce; Brent oil is 43.65USD/barrel. The former one has been dropping while the latter one is stablizing and even rising a bit.

From the figures above, the risk of corporate bankrupcy or under the risk of bankrupcy has been increasing. Another horrible phenomenon is that the traditional safe havens, bonds and gold, both have their prices decreased. Considering the re-tightening of credits and available capital and even potential issuance of rights by banks and corporates due to adverse result announcement (and expectation by the market about bankrupcy or at least heavy debt), the available fund in the market will be sucked to the "black holes" due to massive write-off. It also hints that another wave of not only stock market drops but may also be all market drop (and even further job cut) are coming. Seat tight, fasten your seat belt, and prepare!

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