Category Archives: High Yield

MSFT buyback yet another low interest rate story

Company buys 8.7% of market cap (post announcement pop) and makes dividend yield close to 2.7%. Why not? It can always borrow at 75 over ten yr like last time (2.45% at today’s close) and write off interest costs. Capital restructuring. 


PIPPA MALMGREN: China thinks the US will default via inflation – Business Insider–jk8lZLGA

Can fed raise rates with flat 2s 10s?

The story is of low global growth and even lower inflation. With that backdrop, there should be an ever-present long-duration buyer to anchor in returns and therefore forcing its effects on shorter duration paper (thus explaining the current flattening in 2-10s). 

Today’s wsj also talks of real inflation being closer to zero because of inconsistencies in CPI that don’t take into account changing consumer baskets and quality of improvement. 

Thus the fed can’t raise until inflation “normalizes” to the 2% level. Even if it does buck the trend, the legions of bidders are quickly going to bring the effective rate of interest back to low levels. If global growth stories are intertwined as also the market for financial instruments, how can the fed operate from a domestic vacuum?

Why Ackman is right and wrong about index funds

Ackman rightly says that index funds will “keiretsu” corporate America by showering attention (passive as well) on a mostly-stagnant pool of assets, thus propelling their value over time (and unfairly over the rest of the herd). But if mean-reversion holds true, those index funds will create a minefield for themselves and self-destruct; because as value creation dies (falling victim to stupid money continuing to chase a limited set of assets), distorted valuations between the “chased” and “not chased” will herald the natural death of index plays and the rise of “active” plays that focus on value. Perhaps Ackman is saying he can’t wait for that event to happen?


“too big to fail”. Now a buyside mantle?

fast forward to the end and gross makes a compelling point


REVERSE INQUIRY – THE NEW MANTRA – CASH ON SIDELINES CANNOT WAIT bond-underwriters-have-arrived-in-search-of-alpha

Credit comment: Volatility in rates stepped up a few notches

Credit comment: Volatility in rates stepped up a few notches as a Greek deal tetered between German-mandated further austerity requirement and Greek demands for relief; we saw more mud-slinging from both sides with little clarity. After widening most of the time during the rate backup, credit decided to draw its line in the sand and make some wary gains (IG is probably 4-5 bps better). The story is still gory in credit overall; outflows in HY in recent weeks from flighty ETF money have severely dented the YTD inflow numbers. The M&A deals continue to gain favor; and look enticing, especially to the acquirers on the IG side as low rates continue to permit such combinations; Today, we saw ETP wooing Williams to prepare for a backlog in pipelines. With the new plateaus set by oil, Energy should continue to see this activity as players jockey to position themselves for the new normal (if they have access to the capital markets, that is.